Economy
RBI Tightens Rupee Derivatives Rules, Raises Cash Reserve Burden
The RBI tightened rupee foreign-exchange derivative rules, cutting thresholds and requiring a 20% cash reserve on larger contracts.
What happened
The RBI issued two circulars restricting rebooking of cancelled INR-linked foreign-exchange derivatives, while continuing to allow maturity rollovers under existing rules. It cut the threshold for transactions without proving underlying exposure from USD 100 million to USD 5 million. Dealers must also hold a 20% cash Foreign Exchange Risk Reserve for INR-linked contracts above USD 2 million hedging eligible current-account exposures.
Why it matters
Businesses face tighter limits on unsupported currency positions, additional declarations against duplicate hedging, and a significant cash-reserve requirement on larger eligible contracts.
Source: RBI