RBI amended derivative contract limits for Small Finance Banks under Section 35A of Banking Regulation Act, 1949. The revision eases hedging norms in foreign exchange markets.
RBI Raises Derivative Contract Limits for SFBs
The Reserve Bank of India has issued the Reserve Bank of India (Small Finance Banks – Miscellaneous) Amendment Directions, 2026, effective October 19, 2026. The amendment modifies Section C on 'Limits for Non-Option Derivative Contracts' in Chapter IV of the 2025 Directions.
Acting under Section 35A of the Banking Regulation Act, 1949, the RBI has revised exposure ceilings to allow Small Finance Banks (SFBs) greater flexibility in managing foreign exchange risks. The revised limits support better hedging capabilities for import/export-related exposures and promote financial inclusion through enhanced risk management tools.
Legal and compliance departments of SFBs must review internal risk policies and obtain board approvals, if necessary, to operationalise the revised limits. The change reflects RBI’s targeted regulatory easing for niche banking institutions.
Citations
- Banking Regulation Act, 1949, Section 35A
