RBI Tightens Forex Derivative Rules to Curb Rupee Volatility
· Business · Economic Times, Bloomberg
The Reserve Bank of India has tightened foreign exchange derivative rules involving the Indian rupee by restricting the rebooking of cancelled contracts. Authorised dealers are barred from allowing users to rebook deliverable or non-deliverable currency derivative contracts that were cancelled after the issuance of the new directions. The central bank also sharply reduced the threshold for undertaking foreign exchange derivative transactions to hedge contracted exposures without establishing underlying exposure, lowering the limit from $100 million to $5 million. A corresponding reduction has been introduced for exchange-traded currency derivatives involving the rupee across all recognised stock exchanges. Additionally, the revised framework introduces mandatory checks for hedging activities and a 20% cash reserve requirement for certain transactions.
Why it matters
Importers, exporters, and corporate treasuries face stricter compliance and lower limits for unhedged foreign exchange exposures, which directly impacts corporate hedging strategies amid pressure on the Indian rupee.
Read the original report — Economic Times
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