Summary of this article
RBI bars non-deliverable INR derivative contracts for all users
Rebooking of cancelled forex derivative contracts now not allowed
Banks restricted from INR derivative deals with related parties
The Reserve Bank of India (RBI) has revised guidelines regarding foreign exchange (forex) derivatives on Indian rupee (INR), besides extending restrictions on the use of non-deliverable contracts and imposing additional restrictions on authorised dealers (ADs) and users. The changes have been made following an evaluation of the market conditions.
What The New Rules State
According to a circular dated April 1, 2026, non-deliverable derivative (NDD) contracts of the INR between resident and non-resident users have now been prohibited on ADs. Notably, NDDs are settled in cash without actual delivery of the currency, and are commonly used in offshore markets.
Now, RBI has permitted ADs to continue offering deliverable contracts of forex derivatives. These involve the exchange of currencies and are used to manage currency risk. Users who get into such contracts should not offset them in NDDs. ADs have the option of searching documents and information to enforce compliance.
The guidelines have come into immediate effect and will be in operation until further review. RBI issued these instructions under Section 10(4),11(1) and 11(2) of the Foreign Exchange Management Act (FEMA), 1999.
Limits To Rebooking Cancelled Contracts
The circular prohibits rebooking of the forex derivative contracts in INR if they are cancelled after the issuance of the new rules. This is applicable to both deliverable and non-deliverable contracts.
Rebooking allows a user to cancel an existing contract and enter a new one. This limitation removes the option for INR-linked derivatives in the future. ADs must confirm compliance and can be asked to provide supporting documentation.
No Dealings With Related Parties
ADs have also been prohibited to enter into forex derivative contracts with related parties using INR. The accounting standards that define related parties include IAS 24 or Ind AS 24.
This is applicable to transactions between banks and entities regarded as related under these standards.
Influence On Market players
The revisions will also affect organisations that rely on forex derivatives to deal with currency exposures. NDD users might be required to transfer to deliverable contracts or reposition themselves.
ADs will have to conduct more checks and keep records to ensure that the new rules are followed. The restriction on rebooking also changes how users can respond to changes in currency movements after cancelling a contract.
