RBI partially withdraws restrictions on certain rupee derivative trades
April 20, 2026
The central bank had also stopped authorised dealers from entering into any FX derivative contract involving INR with their related parties
The central bank had also stopped authorised dealers from entering into any FX derivative contract involving INR with their related parties
Reserve Bank of India (RBI)
Reuters
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The Reserve Bank of India on Monday rolled back restrictions on certain types of rupee derivative trades, which it had initiated earlier April to arrest the currency's slide to successive record lows.
As part of its clamp-down on arbitrage trades that had exacerbated the rupee's volatility, the central bank on April 1 barred lenders from offering clients non-deliverable forwards and also barred users from rebooking cancelled forward contracts.
The central bank had also stopped authorised dealers from entering into any FX derivative contract involving INR with their related parties.
While the first two instructions have been withdrawn entirely, the central bank has tweaked restrictions on related party deals to allow cancellation and rollover of existing contracts and transactions undertaken with a non-resident entity on a back-to-back basis.
The relaxations mark a partial rollback of crisis-era measures that the RBI tapped to arrest the rupee's slide to a record low past 95 in late March.
The initial restrictions had targeted arbitrage trades by placing a cap on banks' net open rupee positions. However, the curbs failed to offer relief to the currency as banks exited positions by offering them to corporates and related parties, Reuters had reported.
The second round of restriction rolled out on April helped spark a bounce of about 2% in the South Asian currency, after which it has steadied in a 92.50-93.50 range over recent sessions.
The limit on banks' net open rupee positions in the onshore market at $100 million, though, remains in place.
"The rollback suggests the RBI wanted to restore normal hedging activity while continuing to curb speculative trades which made the currency vulnerable," an FX trader with a private bank said.
The relaxation also follows scrutiny of such corporate and related-party transactions on concerns that they skirted regulations and impeded efforts to shore up the currency.
India's curbs on banks' foreign-exchange positions will not remain in place indefinitely, central bank chief Sanjay Malhotra said earlier in the month.
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First Published: Apr 20 2026 | 5:10 PM IST
Reserve Bank of India (RBI)
Reuters
Listen to This Article
The Reserve Bank of India on Monday rolled back restrictions on certain types of rupee derivative trades, which it had initiated earlier April to arrest the currency's slide to successive record lows.
As part of its clamp-down on arbitrage trades that had exacerbated the rupee's volatility, the central bank on April 1 barred lenders from offering clients non-deliverable forwards and also barred users from rebooking cancelled forward contracts.
The central bank had also stopped authorised dealers from entering into any FX derivative contract involving INR with their related parties.
While the first two instructions have been withdrawn entirely, the central bank has tweaked restrictions on related party deals to allow cancellation and rollover of existing contracts and transactions undertaken with a non-resident entity on a back-to-back basis.
The relaxations mark a partial rollback of crisis-era measures that the RBI tapped to arrest the rupee's slide to a record low past 95 in late March.
The initial restrictions had targeted arbitrage trades by placing a cap on banks' net open rupee positions. However, the curbs failed to offer relief to the currency as banks exited positions by offering them to corporates and related parties, Reuters had reported.
The second round of restriction rolled out on April helped spark a bounce of about 2% in the South Asian currency, after which it has steadied in a 92.50-93.50 range over recent sessions.
The limit on banks' net open rupee positions in the onshore market at $100 million, though, remains in place.
"The rollback suggests the RBI wanted to restore normal hedging activity while continuing to curb speculative trades which made the currency vulnerable," an FX trader with a private bank said.
The relaxation also follows scrutiny of such corporate and related-party transactions on concerns that they skirted regulations and impeded efforts to shore up the currency.
India's curbs on banks' foreign-exchange positions will not remain in place indefinitely, central bank chief Sanjay Malhotra said earlier in the month.
Don't miss the most important news and views of the day. Get them on our Telegram channel
First Published: Apr 20 2026 | 5:10 PM IST