RBI relaxes rules for cancellation and rebooking of forex derivative contracts. AD banks now have revised operational flexibility under updated risk management guidelines.
RBI Updates Forex Derivatives Rollover Policy
The Reserve Bank of India, through Circular No. A.P. (DIR Series) 25 dated October 10, 2026, has issued new guidance on the cancellation and rebooking or rollover of foreign exchange derivative contracts. The directive forms part of ongoing revisions to the Master Direction on Risk Management and Inter-Bank Dealings dated July 5, 2016.
Under the revised norms, Authorized Dealers (ADs) are permitted greater operational flexibility in managing client derivative positions. The RBI clarified that cancellations followed by rebooking will be allowed only under specified circumstances to prevent misuse while accommodating genuine hedging needs. Banks must ensure proper documentation and purpose verification.
This amendment responds to industry feedback on liquidity constraints and operational difficulties in managing long-dated hedges.
An Authorised Dealer shall not allow cancellation and rebooking of a forward contract unless...indicates tightened oversight on synthetic rollovers.
Corporate lawyers and compliance officers must review hedging arrangements and client advisories in light of these changes. Institutions should update their internal credit and market risk policies to reflect the revised FEMA-compliant framework for derivatives.
Citations
- Master Direction - Risk Management and Inter-Bank Dealings, July 5, 2016 (as amended)
