RBI has revised the Foreign Exchange Risk Reserve requirements to maintain orderly market conditions amid evolving external sector dynamics.
RBI Modifies Forex Risk Reserve Policy
The Reserve Bank of India, in Circular No. 26 dated October 10, 2026, announced adjustments to the Foreign Exchange Risk Reserve requirements under the Master Direction on Risk Management and Inter-Bank Dealings. The move aims to ensure orderly functioning of the foreign exchange market in light of evolving macroeconomic and external sector conditions.
While specific rate adjustments or tenor-based differentials were not detailed in the public circular, the RBI reiterated its authority to levy risk reserve requirements on forex forward contracts based on maturity and amount. The framework remains a macroprudential tool to contain excessive speculation and volatility in forex derivatives.
Market participants and legal advisors must monitor RBI’s notifications closely, as discretionary changes in risk reserve rates can affect hedging costs and transaction structuring for corporates with forex exposure. The amendment underscores RBI's proactive stance in market stabilization.
Citations
- Master Direction - Risk Management and Inter-Bank Dealings, July 05, 2016