RBI removes paragraph 37 from Commercial Banks (Miscellaneous) Directions, 2025, eliminating caps on non-option derivatives.
RBI Deletes Derivative Limits for Commercial Banks
In a significant regulatory shift, the Reserve Bank of India has issued the RBI (Commercial Banks – Miscellaneous) Second Amendment Directions, 2026, deleting paragraph 37 of the 2025 Directions. The deleted provision previously imposed limits on non-option derivative contracts used by commercial banks.
The removal enables banks to better hedge currency and interest rate exposures arising from international operations. The RBI noted that existing risk management frameworks, including ALM guidelines and internal market risk limits, are adequate to prevent speculative excesses.
The change harmonises treatment across banking entities and enhances operational autonomy. Legal advisors must ensure client compliance with reporting under Master Direction on Derivatives and Stress Testing norms.
Citations
- RBI (Commercial Banks – Miscellaneous) Directions, 2025, para 37
