RBI prohibits arbitrary cancellation or rollover of FX derivative contracts by authorized dealers, enhancing transparency and curbing speculative practices.
RBI Cracks Down on FX Derivative Rebooking
The Reserve Bank of India, on October 10, 2026, issued A.P. (DIR Series) Circular No. 25, restricting the cancellation and rebooking or rollover of foreign exchange derivative contracts by authorized dealers. The move aims to prevent misuse of hedging instruments for speculative purposes and improve transparency in FX markets.
Under the revised guidance, an authorized dealer may cancel or roll over a derivative contract only upon receipt of a written undertaking from the client confirming the original hedging objective has lapsed or changed. This is in addition to standard KYC and AML checks. The restriction applies broadly to forwards, swaps, and options in both trade and capital account derivatives.
This clarification closes a potential loophole used to extend speculative positions under the guise of hedging. Legal advisors must ensure client documentation supports bona fide hedging and update internal compliance protocols. Regulatory scrutiny of rebooking patterns is expected to intensify.
Citations
- Master Direction - Risk Management and Inter-Bank Dealings, RBI, 2016
