NEW DELHI: With the cap on banks taking speculative positions on rupee in overseas forward markets failing to yield desired results, the Reserve Bank of India (RBI) has barred banks from offering non-deliverable derivatives (NDFs) in INR anymore to anyone (resident or foreign). NDFs are contracts where no actual currency is exchanged.
In a new diktat, the RBI has said that banks can still offer normal (deliverable) forex derivatives for genuine hedging (like exporters/importers managing currency risk), but users cannot take opposite positions in NDFs elsewhere to game the system.
If a forex derivative contract is cancelled, the user can't rebook it again. This stops people from cancelling and re-entering trades to take advantage of market movements.
Banks have also been asked not to enter such derivative contracts with their own related entities (group companies, affiliates, etc.).
These instructions come into effect immediately, until further review.
Last week, the RBI directed banks to limit their net open position in the rupee (NOP-INR) in the onshore deliverable market to $100 million at the end of each business day, in a move aimed at managing exchange rate volatility.
Despite the newly-introduced cap on rupee bets, the rupee fell like ninepins on Monday to go past the 95.20 mark for the first time in the second half of the trade and closed at a new low of 94.83. Rupee fell by 9.55% in FY26.
It had closed at 94.81 on Wednesday.