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Informist, Tuesday, Feb. 17, 2026

 

--RBI issues draft norms on foreign exchange dealings of authorised persons

--RBI seeks comments on FX dealing of authorised person draft norms by Mar 10 

--RBI: Reviewed norms to give authorised dealers flexibility on FX products 

--RBI: Reviewed norms to give authorised dealers flexibility on risk mgmt 

 

MUMBAI – The Reserve Bank of India Tuesday released draft directions on foreign exchange dealings of authorised persons, aimed at providing greater flexibility to banks and standalone primary dealers with respect to foreign exchange products, risk management, and platforms. The central bank has sought feedback on the norms by Mar. 10.

 

The RBI has reviewed directions to provide greater flexibility to Authorised Persons--Authorised Dealer Category-I banks and Standalone Primary Dealers--to undertake foreign exchange transactions for hedging exposures, managing balance sheets, market-making, and easier reporting obligations, the central bank said in a release.

 

Under the draft directions, the RBI has proposed allowing authorised dealers to place and accept deposits in foreign currency with other authorised dealers, their own overseas branches, International Financial Services Centre banking units, and offshore banking units in special economic zones. Banks and standalone primary dealers can also borrow and lend in foreign currency as per the draft norms.

 

The RBI has proposed to allow Authorised Dealer Category-I banks to undertake non-deliverable derivative contracts as long as the bank has an operational IFSC banking unit. Such transactions may be required to be settled in cash in rupee or any foreign currency, the RBI said.

 

Banks and standalone primary dealers can undertake foreign exchange derivative contracts and foreign currency interest rate derivative contracts on electronic trading platforms, as per the draft directions.

 

The RBI has proposed to let Authorised Dealers to undertake permitted exchange-traded currency derivative contracts on recognised stock exchanges in India. Authorised Dealers may also undertake transactions not involving the rupee on overseas exchanges, the central bank said. 

 

Designated banks under the Gold Monetization Scheme and banks allowed to enter into forward gold contracts with constituents in India may hedge price risks of gold using exchange-traded and over-the-counter hedging products in overseas markets, the RBI has proposed. "While using products involving options, the bank may ensure that there is no net receipt of premium, either direct or implied," the central bank said.

 

Banks and standalone primary dealers will be allowed to use surplus funds in their foreign currency accounts for overnight placements and for reverse repos with maturity of up to one year. The RBI has also proposed to allow the use of surplus funds in foreign currency accounts for investment in overseas money market instruments and debt instruments issued by another country with original or residual maturity of up to one year.

 

Such funds may also be used for lending in rupee and foreign currency. Undeployed Foreign Currency Non-Resident (Bank) funds may also be invested in long-term overseas debt instruments issued by another country, subject to the condition that the residual maturity of such instruments shall not exceed the maturity of the underlying FCNR(B) deposits, the RBI said. 

 

An Authorised Dealer Category-I bank may borrow in foreign currency from its head office, overseas branches, overseas banks, and multilateral financial institutions, the RBI has proposed. "Overseas foreign currency borrowings by an Authorised Dealer Category-I bank shall not exceed 100 per cent of its Tier I capital or USD 10 million (or its equivalent in any other currency), whichever is higher," the RBI said. "Any borrowing above this limit shall be made only with the prior approval of the Reserve Bank."

 

A standalone primary dealer will be allowed to borrow in foreign currency from its parent or banks outside India and avail overdrafts in nostro accounts, the RBI said.

 

The market timings for customer and inter-bank foreign exchange transactions shall be as specified by the RBI from time to time. An Authorised Dealer may also undertake transactions beyond onshore market hours with users and with other Authorised Dealers, IFSC banking units, and offshore banking units, as per the draft directions.  End

 

Reported by Shubham Rana

Edited by Tanima Banerjee and Rajeev Pai

 

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