The RBI has issued updated guidelines for Authorised Dealer Category-I banks operating in International Financial Services Centres, requiring enhanced risk management protocols for inter-bank dealings and derivatives rebooking.
RBI Issues Revised Risk Management Framework for IFSC Units
The Reserve Bank of India (RBI) has issued A.P. (DIR Series) Circular No. 27 dated October 12, 2026, updating risk management requirements for Authorised Dealer Category-I banks operating in International Financial Services Centres (IFSCs). The circular references the Master Direction on Risk Management and Inter-Bank Dealings dated July 5, 2016, as amended, and introduces specific protocols for Standalone IFSC Banking Units.
Key Operational Requirements
Pursuant to Para 2.3(iii) of Section I of Part A of the Master Direction, AD Category-I banks with IFSC operations must now implement segregated risk frameworks, ensuring that foreign exchange derivative positions in IFSC units are managed independently from domestic books. The RBI has emphasized compliance with reporting and margining standards aligned with international best practices.
Additionally, under a separate circular (AP DIR Series No. 25), the RBI has restricted unilateral cancellation or rollover of foreign exchange derivative contracts by authorised dealers, mandating client consent and documentation to prevent unfair practices.
These measures reflect the RBI's focus on strengthening market integrity and mitigating systemic risk in offshore financial segments. Practitioners must review internal compliance systems for IFSC operations and ensure adherence to revised reporting under the Foreign Exchange Management Act, 1999.