RBI bars rebooking of cancelled INR forex derivative contracts, reduces unhedged position threshold to USD 5 million, and mandates enhanced hedging disclosures, effective immediately.
RBI Tightens INR Forex Derivative Rebooking Rules
The Reserve Bank of India has introduced tighter regulations governing INR forex derivatives to curb speculative activities. Effective immediately, banks and entities are prohibited from rebooking a cancelled INR forex derivative contract, closing a regulatory loophole previously used to extend exposure artificially.
The new framework also lowers the threshold for reporting and monitoring unhedged positions from USD 10 million to USD 5 million. Entities must now submit declarations affirming legitimate hedging purposes and justify positions exceeding the new threshold. These measures aim to enhance transparency and reduce systemic risk in the foreign exchange derivatives market.
Practitioners advising corporates on forex risk management must review existing hedging structures, ensure strict adherence to timelines, and update compliance protocols for derivative transactions. The changes underscore a shift toward stricter oversight in cross-border financial instruments under FEMA, 1999.
