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20% FX Risk Reserve for Large INR Derivatives
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Reserve Bank of India (Regulatory Circular)femabankingcorporate

20% FX Risk Reserve for Large INR Derivatives

October 13, 2026

RBI mandates a 20% foreign exchange risk reserve on INR derivative contracts exceeding USD 2 million, requiring daily cash deposits and real-time reporting to curb speculative pressures.

20% FX Risk Reserve for Large INR Derivatives

The RBI has introduced a Foreign Exchange Risk Reserve (FERR) of 20% on qualifying INR derivative contracts exceeding USD 2 million in value. The reserve must be maintained in cash with designated banks on a daily basis, accompanied by real-time reporting obligations.

This measure targets non-deliverable forwards (NDFs) and other synthetic exposures that could amplify volatility in the INR. By imposing a significant cost on large speculative positions, the RBI aims to deter excessive shorting and stabilise the currency during periods of external stress.

The new rule requires immediate compliance reviews by financial institutions and corporates using INR derivatives for hedging or trading. Legal teams must assess margining arrangements, monitor reporting timelines under FEMA, and advise on the operational impact of daily reserve maintenance.

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