ADs also could not undertake any foreign exchange derivative contract involving INR with their related parties.
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FRANCIS MASCARENHAS
The Reserve Bank of India (RBI) on Monday decided to partially roll back its measures that prevented Authorised Dealers (ADs) from offering foreign exchange derivative contract involving the Indian Rupee. This comes in the wake of hedging becoming difficult and Dollar liquidity tightening.
RBI said ADs cannot undertake any foreign exchange derivative contract involving INR (Indian Rupee) with their related parties except for cancellation and rollover of existing contracts; and transactions undertaken with non-related non-resident users on a back-to-back basis.
The April 1 RBI directive, which was aimed at curbing speculation and arbitrage in foreign exchange market, disallowed ADs to offer non-deliverable derivative contracts involving INR to resident or non-resident users. Further, they could not permit a user to rebook any foreign exchange derivative contract involving INR, whether deliverable or non-deliverable, which is cancelled.
ADs also could not undertake any foreign exchange derivative contract involving INR with their related parties.
Dipti Deodhar, CEO, Mecklai Financial Services, observed that the original action was intended to curb the speculation and effectively break the momentum of Rupee depreciation on account of speculative positions.
She said this measure had unintentional consequences like hedging becoming difficult, liquidity drying up and at some psychological level it led to panic. “So, as a solution, RBI allowed NDF (non-deliverable forward) access again (a key liquidity restoration step) and removed rebooking restriction (restores flexibility),” opined Deodhar.
However it has still not allowed ADs entering into fx derivative (involving INR) with related parties except for original contracts being cancelled and rebooked – this will ensure no round tripping or artificial volume creation . “While this move is not particularly rupee positive or something that can cause rupee appreciation, but it certainly stabilises the rupee outlook with improved liquidity and reduced offshore dominance. We can read this as – extreme downside risk being managed more smoothly now,” she said.
Speculative activity
V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank, noted that while the earlier RBI measures were aimed at curbing speculative activity, their combined impact tightened liquidity and affected normal market functioning.
“The rollback helps restore flexibility, improve price discovery and bring stability back to the onshore FX market. For the Rupee, the impact is largely neutral as it supports liquidity without encouraging excessive speculation,” he said.
Abhishek Goenka, Founder and CEO, IFA Global, said the earlier restriction on cancellation and rebooking against same underlying exposure had created difficulties for those with genuine reasons — for instance a delay in payment/receipt. “It would have also been operationally difficult for banks to track and establish whether the same underlying was being used to rebook. They would have had to rely on undertaking from clients,” he said. Goenka observed that was a view in the market that such moves could be perceived as regressive.
Meanwhile, the Rupee closed weaker above the 93 to the Dollar, logging its biggest fall in a week, amid continued uncertainty on resolution of the West Asia war.
The weakness in the Indian currency was accentuated by FPIs continued exit from the Indian equity markets and rising crude oil prices.
The Rupee closed at 93.1275 per US Dollar, down about 20 paise against the previous close of 92.93.
Published on April 20, 2026
