The Reserve Bank of India (RBI) has introduced regulatory measures to strengthen market discipline, enhance risk management, and ensure orderly functioning of the foreign exchange market.
The following has been stated:
It has restricted Authorised Dealers from permitting rebooking of INR-involving foreign exchange derivative contracts that have been cancelled, while rollovers at maturity will continue to be permitted subject to existing regulations.
The threshold for undertaking foreign exchange derivative transactions without establishing underlying exposure has also been reduced from USD 100 million to USD 5 million, including exchange-traded INR currency derivatives.
Further, users entering into INR-involving foreign exchange derivatives to hedge contracted exposures will be required to provide an undertaking confirming that the same underlying exposure has not been hedged with another Authorised Dealer.
It has also introduced a Foreign Exchange Risk Reserve (FERR), requiring Authorised Dealers to maintain a cash reserve equivalent to 20% of the INR value of each INR-involving foreign exchange derivative contract exceeding USD 2 million, for specified current-account exposure hedging transactions. These measures are aimed at promoting transparency, strengthening risk management, and maintaining an orderly foreign exchange market.
[Press Release: 2026-2027/1305]
