The Reserve Bank of India has revised the foreign exchange risk reserve requirements for Authorised Dealers to ensure orderly market conditions. The changes include revised risk weights and reporting standards under the Master Directions on Risk Management.
RBI Amends Forex Risk Reserve Norms for Authorised Dealers
On October 10, 2026, the Reserve Bank of India (RBI) issued Circular No. 26 (A.P. DIR Series) revising the foreign exchange risk reserve framework applicable to Authorised Dealers (ADs). The amendment modifies the risk weights assigned to open positions in foreign currency and introduces updated reporting requirements to enhance transparency and market stability.
The circular builds upon the Master Direction - Risk Management and Inter-Bank Dealings dated July 5, 2016, as amended. It mandates ADs to maintain higher risk reserves on net open positions, particularly for emerging market currencies and non-convertible instruments. The RBI cited evolving global macroeconomic conditions and volatility in forex markets as key reasons for the revision.
Practitioners must note that these changes necessitate recalibration of internal risk models and compliance protocols within AD institutions. Banks and financial entities must ensure adherence to updated reserve calculations and enhance disclosure in fortnightly returns to the RBI. The amendments reflect RBI’s proactive stance on systemic risk management in forex operations.