India's RBI bans banks from offering NDFs and rebooking FX derivatives
Bank treasury teams and corporate treasuries cannot execute NDFs or rebook FX derivatives
Change
India's Reserve Bank of India (RBI) prohibited banks and authorised dealers from offering non-deliverable forward (NDF) contracts to resident or non-resident clients, banned rebooking of any foreign-exchange derivative contracts, and barred FX derivative deals with related parties, effective immediately until further review.
Why it matters
Client arbitrage between onshore forwards and offshore non-deliverable forward (NDF) markets is now blocked. A senior treasury official said the premium between local and offshore NDF markets will rise when trading resumes.
Implications
- — Bank treasury teams and authorised-dealer foreign-exchange desks in India must immediately stop offering or executing non-deliverable forward (NDF) contracts for resident or non-resident clients — continuing to transact risks regulatory enforcement for breach of RBI rules.
- — Banks' compliance and risk teams in India must immediately disable or update rebooking workflows and transaction controls to prevent rebooking of any foreign-exchange derivative contracts — failure invites supervisory action or penalties for non-compliance.
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- Implications: What this forces you to change — operations, exposure, or compliance.
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Source
View on Economic Times