On October 16, 2026, the RBI issued a set of Frequently Asked Questions (FAQs) clarifying the Foreign Exchange Risk Reserve (FERR) requirements introduced via AP(DIR Series) Circulars No. 26 and 27 dated October 10 and 12, 2026.
Clarifications on FERR Requirements
The Reserve Bank of India released a set of Frequently Asked Questions (FAQs) on October 16, 2026, to clarify the applicability and compliance procedures for the Foreign Exchange Risk Reserve (FERR) requirements. These were introduced through A.P. (DIR Series) Circular No. 26 (October 10, 2026) and Circular No. 27 (October 12, 2026), aimed at enhancing macroprudential oversight of foreign exchange exposure.
The FAQs address practical issues faced by banks and authorized persons in calculating FERR on FX forward and option books, including eligible hedges, time bands for netting, and reporting timelines. The guidance aims to ensure uniform implementation and reduce regulatory arbitrage.
Regulatory Compliance for Institutions
Authorized dealers and corporate treasuries must review the FAQs to align internal risk and compliance frameworks with updated norms. The clarifications may impact forex hedging strategies, capital charges, and balance sheet reporting. Institutions should integrate these into their monthly FERR submissions under the Foreign Exchange Management Act (FEMA), 1999.