RBI has updated guidelines on cancellation and rebooking of foreign exchange derivative contracts to prevent misuse while allowing legitimate corporate hedging needs.
RBI Tightens Rules on FX Derivative Rollovers
In a circular dated October 10, 2026, the RBI revised its Master Direction on Risk Management and Inter-Bank Dealings, specifically addressing the cancellation and rebooking (rollover) of foreign exchange derivative contracts. Authorised Dealers are now required to ensure that such transactions are bona fide and linked to underlying exposures.
The updated norms impose stricter documentation requirements, prohibiting automatic rollovers without reassessment of client eligibility and exposure justification. The move aims to prevent speculative behavior while preserving legitimate hedging activities by corporates and individuals.
Implication for Practitioners: Legal and compliance teams in Authorised Dealer banks must strengthen client onboarding and transaction review processes. Documentation must clearly link each rollover to a valid exposure, and internal audit frameworks should be updated accordingly.
Citations
- Master Direction - Risk Management and Inter-Bank Dealings, July 05, 2016, as amended