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Corporate Laws Central Ministry of Finance Foreign Exchange Management Act, 1999

RBI issues a circular on directions on foreign exchange derivative contracts related to Risk Management and Inter-Bank Dealings

12-Oct-2026 | RBI/2026-27/293 A.P. (DIR Series) Circular No. 27

RBI has issued a circular on directions for foreign exchange derivative contracts related to Risk Management and Inter-Bank Dealings. Key Highlights: 1. All the authorised dealers shall offer non-deliverable derivative contracts (NDDCs) involving INR to a non-resident user only for hedging. 2. An Authorised Dealer shall be required to maintain a Foreign Exchange Risk Reserve (FERR) for foreign exchange derivative contracts involving INR undertaken by it for hedging the currency risk of its own assets and liabilities, and shall be equal to 20 per cent of the INR equivalent of the notional amount of each derivative contract. 3. The FERR shall apply to all foreign exchange derivative contracts involving INR where the Authorised Dealer is purchasing foreign currency against INR. 4. The FERR shall be deposited and maintained by way of cash in India with the Reserve Bank of India daily and shall be maintained until the termination of the contract.

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