RBI has clarified that authorised dealers must treat cancellation and rebooking of forex derivative contracts as fresh transactions, requiring fresh end-use documentation. This aims to curb circumvention of exchange control norms.
RBI Tightens Rules on Forex Derivative Rebookings
In a circular dated October 10, 2026 (A.P. DIR Series No. 25), the Reserve Bank of India (RBI) has reiterated that the cancellation and subsequent rebooking or rollover of foreign exchange derivative contracts by authorised dealers must be treated as a fresh contract. The directive applies to all Authorised Dealer Category-I banks and underscores the need for fresh end-use documentation in such cases.
The central bank highlighted that this measure is in response to evolving market conditions and is intended to prevent the misuse of rollover mechanisms to circumvent end-use restrictions under foreign exchange regulations. Paragraph 2.3(iii) of the Master Direction on Risk Management and Inter-Bank Dealings (July 5, 2016, as amended) has been invoked to reinforce compliance. Banks are directed to ensure that rebooked positions align with the original underlying exposure.
"An Authorised Dealer shall not treat rollover or rebooking as an extension of the original contract, and fresh documentation must be obtained to validate the underlying exposure,"the circular states. This development mandates stricter internal controls and documentation practices for forex desks in Indian banks.
For practitioners, this clarification reinforces the importance of maintaining robust compliance frameworks for forex derivatives. Legal teams advising banks must ensure that transaction policies are updated to reflect this treatment of rebookings as fresh contracts, mitigating regulatory risk.