Foreign Currency

RBI defers implementation of directions on currency derivatives to May 3

NEW DELHI: The Reserve Bank of India (RBI) on Thursday deferred the implementation of its guidelines on exchange-traded currency derivatives (ETCD) linked to the rupee to May 3, following feedback from stakeholders.

Initially set to come to force on April 5, the circular issued on January 5 regarding ‘Risk Management and Inter-Bank Dealings — Hedging of Foreign Exchange Risk’ will now be effective a month later.


The RBI assured that the regulatory framework for ETCDs has remained unchanged.

“There is no change in the RBI’s policy approach,” the RBI said in a statement.

This decision comes in response to concerns raised about market participation after the January circular. Meanwhile, brokers had advised clients to close their existing positions in currency derivatives by April 4.

The RBI said that the circular outlines the Master Direction and reinforces the existing regulatory framework for participation in ETCDs involving the Indian rupee (INR), with no changes made.

“As hitherto, participants with a valid underlying contracted exposure can continue to enter into ETCDs involving the INR up to a limit of USD 100 million without having to produce documentary evidence of the underlying exposure,” the RBI said.


The framework for taking part in ETCDs with the Indian rupee follow the guidelines of the Foreign Exchange Management Act (FEMA), 1999. These rules state that INR currency derivative contracts, whether over-the-counter or exchange-traded, are allowed solely for hedging foreign exchange rate risks.

The RBI also said that the regulatory framework has been strengthened to cover all transaction types under one directive, aiming to improve operational efficiency and accessibility to foreign exchange derivatives.

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