RBI bars rebooking of cancelled forex contracts, cuts no-exposure hedging limit to $5 million

The Reserve Bank of India issued A.P. (DIR Series) Circular No. 25 on 10 October 2026, amending its Master Direction on Risk Management and Inter-Bank Dealings. Authorised Dealers (ADs) -- banks permitted to deal in foreign exchange -- can no longer let a user rebook any foreign exchange derivative contract involving the rupee, whether deliverable or non-deliverable, once that contract has been cancelled with any AD; the bar applies regardless of which AD the cancellation was made with. Rollover of such contracts on maturity remains permitted, subject to the existing Master Direction.

Separately, the circular lowers, from USD 100 million to USD 5 million equivalent, the outstanding notional value up to which a user may take a hedging position without demonstrating an actual underlying exposure; the same lower threshold now applies to exchange-traded rupee currency derivatives across all recognised stock exchanges taken together. ADs must obtain and retain a user's undertaking that the same underlying exposure has not already been hedged with another AD, and must verify underlying exposure and keep related documents for at least two years. The RBI, acting under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 and Section 45W of the Reserve Bank of India Act, 1934, said the measures respond to evolving market conditions and aim to keep the foreign exchange market orderly.