Foreign Exchange Rules Tightened: RBI Issues New Guidelines For Dealers

The RBI has announced fresh regulatory measures governing foreign exchange derivative contracts under its risk management framework. These rules aim to enhance transparency, reduce speculative exposure, and strengthen India’s financial stability.

Deliverable Contracts Permitted
Authorised dealers can continue offering deliverable foreign exchange derivative contracts to users for hedging purposes. However, users must not undertake offsetting non-deliverable positions, ensuring contracts remain aligned with genuine risk management needs.

Restrictions On Dealers
The RBI has prohibited authorised dealers from entering into derivative contracts with related parties. Additionally, dealers are barred from permitting users to rebook any FX derivative contract once cancelled, tightening compliance and reducing potential misuse.

Non-Deliverable Contracts Ban
The central bank has explicitly restricted authorised dealers from offering non-deliverable derivative contracts involving the Indian rupee to both resident and non-resident users, reinforcing the rupee’s regulatory protection.

Key Highlights

• Deliverable contracts allowed for hedging only
• No offsetting non-deliverable positions permitted
• Dealers barred from related-party contracts
• Cancelled contracts cannot be rebooked
• Non-deliverable rupee contracts banned for all users

Sources: Reserve Bank of India circular, regulatory updates, financial news reports