RBI Delays Implementation of Currency Derivatives Guidelines to May 3

The Reserve Bank of India (RBI) has decided to postpone the implementation of its guidelines on exchange traded currency derivatives (ETCD) linked to the rupee until May 3, following feedback from stakeholders. These guidelines, originally set to take effect on April 5, aim to manage risks associated with foreign exchange.

The RBI clarified that its regulatory framework for ETCDs has remained consistent over the years, with no changes in policy approach. Concerns were raised about the participation in the ETCD market after the January circular, prompting the RBI to extend the deadline.

The circular sets out the Master Direction and reiterates the regulatory framework for participation in ETCDs involving the Indian rupee (INR) without any changes. Participants with valid contracted exposure can continue entering ETCDs involving the INR, up to a limit of USD 100 million, without needing to provide documentation.

The regulatory framework for ETCDs involving the INR is guided by the Foreign Exchange Management Act (FEMA), 1999, and its regulations. These contracts are permitted solely for hedging exposure to foreign exchange rate risks.

The RBI aims to enhance operational efficiency and accessibility to foreign exchange derivatives by consolidating all transaction types, both over-the-counter (OTC) and exchange traded, under a single master direction. This move is designed to streamline regulatory processes and ensure compliance with FEMA regulations.