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RBI Scraps Option Premium Deferment Rule from April 2027
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Reserve Bank of Indiabankingfemafinancial_regulation

RBI Scraps Option Premium Deferment Rule from April 2027

October 9, 2026

RBI deletes Paragraph 38 on option premium deferment from commercial banks’ foreign exchange guidelines, effective 1 April 2027.

RBI Removes Option Premium Deferment Provision

The Reserve Bank of India (RBI) has removed Paragraph 38 of the Commercial Banks Miscellaneous Amendment Directions, 2026, which allowed deferment of option premium payments in foreign exchange derivatives. The deletion takes effect from 1 April 2027.

This norm permitted banks to defer physical settlement of premium payments under certain forex options. Its removal signals RBI’s intent to enforce upfront premium settlement to prevent embedded credit and reduce counterparty risk. The move enhances transparency in OTC derivatives.

Banks and corporate treasury units must adjust hedging strategies accordingly. Legal advisors should review ISDA master agreements and credit terms to align with the new settlement timelines.

Practice Areas:bankingfemafinancial_regulation

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