RBI tightens forex derivative rules: What changes for hedging, cancelled trades

What happened: The RBI issued directions barring authorised dealers from allowing users to rebook any rupee-involving foreign exchange derivative contract cancelled with any authorised dealer after the Directions. Rollovers at maturity remain permitted under existing rules. Key numbers: Hedging threshold without establishing underlying exposure cut to $5 million equivalent from $100 million. Why it matters: The RBI said the measures aim to strengthen market discipline, ensure appropriate risk management and maintain orderly, transparent functioning of the foreign exchange market.

The RBI issued directions barring authorised dealers from allowing users to rebook any rupee-involving foreign exchange derivative contract cancelled with any authorised dealer after the Directions. Rollovers at maturity remain permitted under existing rules.

The RBI said the measures aim to strengthen market discipline, ensure appropriate risk management and maintain orderly, transparent functioning of the foreign exchange market.