RBI prohibits rebooking of cancelled INR forex derivative contracts and reduces the unhedged position threshold to USD 5 million. New declaration requirements aim to prevent circumvention of hedging norms.
Curbs on Rebooking of Cancelled Forex Derivatives
The Reserve Bank of India (RBI) has tightened regulations governing INR forex derivative contracts by prohibiting the rebooking of transactions that have been voluntarily cancelled by users. This move closes a perceived loophole where entities cancelled and immediately re-entered similar contracts to adjust terms or evade exposure limits.
In addition, the threshold for reporting unhedged positions has been lowered from USD 10 million to USD 5 million. Market participants must now provide additional declarations confirming that hedges are backed by genuine underlying exposures, aligning with the broader framework under the Foreign Exchange Management Act (FEMA), 1999.
These amendments signal a stricter supervisory approach toward forex risk management practices. Compliance officers and legal counsel must update internal policies and ensure strict adherence to end-use monitoring protocols to avoid regulatory scrutiny.