The Reserve Bank of India (RBI) issued two circulars on October 10, 2026, introducing regulatory changes for the foreign exchange market. These include a ban on rebooking cancelled foreign exchange derivative contracts involving the Indian rupee (INR) and a reduction in the threshold for undertaking derivative transactions without underlying exposure from USD 100 million to USD 5 million. The measures aim to ensure orderly market functioning, the RBI said.
According to the RBI circulars A.P. (DIR Series) Circular No. 25 and No. 26, authorised dealers are no longer allowed to permit users to rebook any cancelled foreign exchange derivative contract involving INR with any authorised dealer. However, rollover of derivative contracts on maturity remains permitted under existing regulations. The threshold for foreign exchange derivative transactions without establishing underlying exposure has been lowered to USD 5 million equivalent across all authorised dealers and recognised stock exchanges.
These regulatory changes reflect the RBI's response to evolving market conditions and aim to strengthen oversight of foreign exchange derivatives. The reduction in the threshold from USD 100 million to USD 5 million significantly tightens the scope for derivative transactions without underlying exposure, potentially impacting hedging strategies and speculative positions. This move aligns with global trends toward tighter controls on currency derivatives to mitigate systemic risks.
The RBI circulars take effect immediately, with authorised dealers required to comply with the new restrictions and documentation requirements. The central bank’s announcement is accessible on its official website, rbi.org.in, under the press release section dated October 10, 2026.