In a measured step to control sharp fluctuations in the currency market, the Reserve Bank of India (RBI) has introduced stricter rules on foreign exchange derivatives to support the weakening rupee.
The central bank has barred banks authorised to deal in foreign exchange from offering non-deliverable derivative contracts involving the rupee to both resident and non-resident users. It has also stopped Authorised Dealers (ADs) from rebooking any foreign exchange (FX) derivative contract involving INR, whether deliverable or non-deliverable, if it has been cancelled. This rule is effective immediately.
However, ADs are allowed to continue offering deliverable FX derivative contracts to meet genuine hedging needs. This is permitted only if the user does not take offsetting non-deliverable derivative positions. To ensure compliance, ADs can request necessary documents or information from users.
Additionally, ADs are not allowed to enter into any FX derivative contract involving INR with their related parties. In such contracts, two parties agree to buy or sell a specific amount of one currency for another at a pre-decided rate on a future date or under certain conditions.
These measures come after RBI’s announcement on March 27, directing banks to unwind long Dollar positions in the domestic forex market.
The move follows a volatile trading session on Monday, the last day of trading in FY26. The rupee recorded a sharp intraday movement of 170 paise, crossed the 95 mark against the Dollar for the first time, and finally closed at a record low of 94.83.
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