RBI Adjusts Derivative Limits for Banks

RBI Revises Derivative Exposure Limits

In two separate amendment directions issued on October 19, 2026, the RBI has revised the permissible limits for non-option derivative contracts for both commercial banks and small finance banks. The changes are made under Section 35A of the Banking Regulation Act, 1949, which empowers the RBI to issue prudential norms and curtail risk-taking.

The amendments modify Section C of Chapter IV of the respective 'Miscellaneous' Directions for 2025, tailoring derivative limits to better reflect market conditions and risk profiles. These instruments, including forwards and swaps, are now subject to recalibrated exposure ceilings to prevent undue concentration and market volatility.

Banking lawyers must factor these revised limits into risk advisory and compliance workflows. The move signals the RBI’s vigilance in regulating off-balance-sheet exposures, especially in volatile forex and interest rate environments. Institutions should update internal risk matrices and board reporting templates accordingly.