The Reserve Bank of India, through Circular No. 03 dated April 1, 2026, has revised guidelines on risk management and inter-bank dealings under the Foreign Exchange Management Act, 1999. Authorised Dealers (ADs) are now prohibited from offering non-deliverable derivative contracts involving the Indian Rupee (INR) to both residents and non-residents. However, deliverable forex derivatives may still be offered for genuine hedging purposes, provided users do not maintain offsetting non-deliverable positions. Additionally, ADs cannot permit rebooking of any cancelled INR derivative contracts—whether deliverable or non-deliverable—after the issuance of this circular. The circular also restricts ADs from entering into INR derivative contracts with related parties, as defined under applicable accounting standards such as Ind AS 24 or IAS 24. These directions take immediate effect and aim to strengthen regulatory oversight, mitigate systemic risks, and ensure prudent forex market practices amid evolving financial conditions.
Reserve Bank of India
RBI/2026-27/04
A.P. (DIR Series) Circular No. 03 Dated: April 01, 2026
To,
All Authorised Dealers
Madam/Sir,
Risk Management and Inter-Bank Dealings (Revised)
Attention of Authorised Dealers is invited to the A.P. (DIR Series) Circular No. 24 dated March 27, 2026 and the Master Direction – Risk Management and Inter-Bank Dealings dated July 05, 2016, as amended from time to time.
2. On a review of evolving market conditions, it has been further decided that:
a) Authorised Dealers shall not offer non-deliverable derivative contracts involving INR to resident or non-resident users. Authorised Dealers may, however, continue to offer deliverable foreign exchange derivative contracts to users to meet their hedging requirements provided that the user does not undertake offsetting non-deliverable derivative positions. For this purpose, the Authorised Dealers may call for such information / documents from users as they deem necessary for complying with the requirements;
b) Authorised Dealers shall not permit a user to rebook any foreign exchange derivative contract involving INR, whether deliverable or non-deliverable, which is cancelled after the date of issuance of these instructions. For this purpose, the Authorised Dealers may call for such information / documents from users as they deem necessary for complying with the requirements; and
c) Authorised Dealers shall not undertake any foreign exchange derivative contract involving INR with their related parties. ‘Related parties’ shall have the same meaning as assigned to it under the Indian Accounting Standard (Ind AS) 24 – Related Party Disclosures or International Accounting Standard (IAS) 24 – Related Party Disclosures or any other equivalent accounting standards.
3. These instructions shall be applicable with immediate effect, until further review.
4. The directions contained in this circular have been issued under Sections 10(4), 11(1) and 11(2) of the FEMA, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
