The RBI has withdrawn its April 1 directive that limited banks from offering non-deliverable forward (NDF) contracts and prohibited rebooking of cancelled foreign exchange derivative trades. The change restores operational flexibility for lenders, enabling a smoother forex derivatives workflow and potentially improving market liquidity for hedging and trading.
The rupee fell 36 paise to around 93.13 per dollar after the RBI rolled back some forex curbs following Monday’s market close. Bank treasury heads said they remain cautious and are holding back non-deliverable forward (NDF) contracts to corporates as RBI likely monitors such trades. Dollar-rupee forward premiums rose, lifting hedging costs, with the 1-year forward yield up 10 bps to 3.10%.
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The Reserve Bank of India has banned banks from offering or rebooking rupee non-deliverable forward contracts, a move expected to widen the gap between domestic and overseas FX pricing. With the restriction in place, banks are reportedly selling dollars locally while buying them abroad. RBI says the goal is to curb speculative activity and bolster the rupee against the US dollar.
The Reserve Bank of India has tightened rules for foreign-exchange markets, targeting non-deliverable forwards to reduce sharp rupee swings. New directives cap banks’ net open foreign-exchange positions and stop them from offering rupee NDF contracts, requiring existing exposures to be unwound and preventing fresh ones. The goal is to limit arbitrage and offshore influence, supporting rupee stability.
The RBI removed fresh restrictions on Indian rupee non-deliverable forwards, but multiple sources say banks are still not rolling them out to clients. The original curbs were imposed after the rupee hit a record low and were lifted this week. Banks are allegedly avoiding trades citing regulatory risk, slowing access to a key hedging tool.
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