RBI Revises Rules On Forex Derivatives

The move is expected to provide greater operational freedom to authorized dealers and market participants, while ensuring compliance with regulatory safeguards. It reflects RBI’s effort to balance risk management with market efficiency in India’s evolving forex landscape.  

Key Regulatory Changes  

RBI has allowed authorized dealers to undertake cancellation and rollover of existing contracts with related parties. However, dealers are restricted from entering into fresh forex derivative contracts involving INR with related parties, except under two specified exemptions.  

Impact On Market Participants  

The withdrawal of restrictions enables both resident and non-resident users to access non-deliverable forwards (NDFs) through banks. This change is likely to enhance hedging flexibility, improve liquidity, and align India’s forex market practices with global standards.  

Future Outlook  

Analysts believe the revised framework will strengthen India’s forex risk management ecosystem. By easing restrictions, RBI aims to encourage more transparent and efficient dealings while maintaining oversight on related-party transactions.  

Policy Highlights  

• RBI withdraws ban on rebooking INR derivative contracts  
• Authorized dealers allowed cancellation and rollover with related parties  
• Restrictions remain on fresh contracts, with two exemptions  
• NDFs permitted for resident and non-resident users  

Sources: Reuters, Economic Times, Business Standard