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RBI ReportPublished 16 Oct 2026Read time 1 minEffective 10 Oct 2026

RBI Creates New Reserve Rule for Large Forex Derivative Contracts

RBI now requires banks to hold a 20% cash reserve against large INR forex derivative contracts.

Impact
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For information only. Not financial advice. Verify with official sources before taking any action.

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What happened

RBI has directed authorised dealers — meaning banks and financial institutions licensed to deal in foreign currency — to set aside a reserve equal to 20% of the value of certain foreign exchange derivative contracts. This applies to contracts where the notional value (the total currency amount the contract covers) exceeds USD 2 million equivalent. The reserve must be kept as cash with the RBI every day until the contract ends.

Why it matters

Foreign exchange derivative contracts are financial agreements businesses use to lock in currency exchange rates for future transactions. RBI introduced this rule to keep the forex market — the market where currencies are bought and sold — stable and orderly. The reserve requirement is meant to reduce excessive speculation and ensure banks have a buffer against large currency risks.

What to check

  • →Check if your business uses large forex hedging contracts above USD 2 million equivalent, as these new reserve rules will apply directly to your bank or dealer.
  • →Ask your bank or forex dealer whether this new reserve requirement will change the cost or terms of your existing or future forex derivative contracts.
  • →Find out if your business imports goods or services and pays in foreign currency, as the hedging contracts you use may now carry additional compliance requirements.
  • →Look at whether your bank passes on any increased costs from this reserve requirement through revised pricing on forex derivative products.
  • →Consider consulting a qualified forex or treasury professional if your business regularly hedges currency risk above the USD 2 million threshold.

This is general information, not financial advice. Check your own position with your lender or an adviser.

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