RBI Restricts INR Forex Derivatives with Related Parties

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  • Last Updated on 22 April, 2026

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RBI forex derivatives

Circular No. A.P. (DIR Series) Circular No. 07, Dated 20.04.2026

The Reserve Bank of India (RBI) has withdrawn the relaxation granted vide circular dated April 1, 2026 and has clarified restrictions on INR-based foreign exchange (FX) derivative transactions with related parties.

1. Prohibition on Related Party Transactions

  • Authorised Dealers (ADs) are now prohibited from undertaking INR-based FX derivative contracts with related parties

2. Limited Exceptions Permitted

The RBI has allowed restricted exceptions for:

  • Cancellation or rollover of existing contracts
  • Back-to-back transactions with:
    1. Non-related, non-resident users
    2. In accordance with the relevant Master Direction

3. Definition of ‘Related Party’

  • The term ‘related party’ shall be interpreted in line with Ind AS / IAS 24

This ensures consistency with accounting and disclosure standards.

4. Regulatory Impact

The revised position aims to:

  • Prevent conflicts of interest and misuse of derivatives
  • Strengthen prudential controls in FX markets
  • Ensure transactions are undertaken at arm’s length

5. Effective Date

  • The directions are effective immediately

6. Conclusion

The withdrawal of the earlier relaxation reinforces RBI’s focus on risk containment and market integrity, ensuring that FX derivative transactions remain transparent, compliant, and free from related-party risks.

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