India's RBI prohibits banks from offering non-deliverable forwards and rebooking FX derivatives
Change
India's RBI barred banks and authorised dealers, effective immediately, from offering non‑deliverable forward contracts on the rupee, rebooking any foreign‑exchange derivative contracts and entering FX derivative trades with related parties.
Why it matters
Closing offshore and rebooking routes removes a common tool banks used to manage end‑of‑day rupee exposure, constraining how they meet the regulator's $100 million end‑of‑day net open rupee position limit. Corporate treasuries will have fewer offshore hedging options and must shift to onshore deliverable hedges or cut FX exposure, increasing operational complexity and likely widening the onshore‑offshore price gap.
Implications
- • Authorised dealer banks must immediately stop offering new non‑deliverable forward contracts to resident and non‑resident clients.
- • Bank treasury and risk‑management teams must update position‑management systems and daily procedures to ensure compliance with the $100 million end‑of‑day net open rupee position cap.
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