RBI Bars INR Forex Derivatives with Related Parties

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  • Last Updated on 27 April, 2026

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RBI forex derivatives

The Reserve Bank of India (RBI), through a circular dated April 20, 2026, has revised norms on risk management and inter-bank foreign exchange dealings, including withdrawal of an earlier circular dated April 1, 2026.

1. Withdrawal of Earlier Relaxation

  • RBI has withdrawn the relaxation granted earlier
  • The revised framework introduces stricter controls on FX derivative transactions

2. Prohibition on Related Party Transactions

  • Authorised Dealers (ADs) are now restricted from entering into INR-based FX derivative contracts with related parties

3. Permitted Exceptions

Two limited exceptions have been allowed:

  • Cancellation or Rollover of Existing Contracts – Existing derivative contracts may be cancelled or rolled over
  • Back-to-Back Transactions
    1. Permitted with non-related, non-resident users
    2. Must comply with existing RBI guidelines

4. Definition of ‘Related Party’

  • The term shall be interpreted as per Ind AS 24 / IAS 24 (Accounting Standards)

5. Legal Framework

  • The directions have been issued under Foreign Exchange Management Act (FEMA), 1999
  • Applicable with immediate effect
  • Subject to any other approvals or permissions required under applicable laws

6. Objective of the Circular

The measure aims to:

  • Strengthen prudential risk management
  • Prevent conflicts of interest and misuse of derivatives
  • Ensure arm’s length transactions in FX markets

7. Conclusion

The revised directions reinforce RBI’s focus on market integrity and risk containment, ensuring that FX derivative transactions remain transparent, compliant, and free from related-party influence.

Click Here To Read The Full Circular

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied