RBI Bars INR NDFs and Restricts FX Derivative Deals

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  • Last Updated on 4 April, 2026

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RBI INR Non Deliverable Derivatives Ban

Circular No. A.P. (DIR Series) Circular No. 03, Dated 01.04.2026

The Reserve Bank of India (RBI) has issued directions imposing restrictions on foreign exchange (FX) derivative transactions by Authorised Dealers (ADs), with immediate effect, to strengthen risk management and curb speculative activities.

1. Restriction on INR Non-Deliverable Derivatives

Authorised Dealers are prohibited from offering INR non-deliverable derivatives to any user.

This move aims to limit exposure to offshore speculative instruments and ensure greater control over currency risk.

2. Disallowance of Rebooking of Cancelled Contracts

The RBI has disallowed the rebooking of cancelled FX derivative contracts.

This prevents misuse of derivative products for speculative gains arising from frequent cancellations and re-entries.

3. Prohibition on Related Party Transactions

Derivative transactions with related parties have been prohibited, ensuring:

  • Elimination of potential conflicts of interest
  • Prevention of circular or non-arm’s length transactions

4. Permissibility of Deliverable Derivatives

Deliverable FX derivatives may continue to be used for genuine hedging purposes, subject to:

  • Compliance with prescribed conditions
  • Availability of supporting documentation

5. Effective Date and Applicability

These directions are:

  • Effective immediately
  • Applicable until further review by the RBI

6. Conclusion

The RBI’s measures reinforce a prudential and risk-sensitive approach to FX derivatives, promoting genuine hedging, transparency, and market discipline, while curbing speculative and related-party exposures.

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