reserve Bank of India
The Reserve Bank of India (RBI) has taken a big step to ensure the strength of the rupee and its correct value in foreign markets. Now, rupee related derivative deals done offshore i.e. abroad will also be closely monitored. Under these new rules that will come into effect from July 2027, banks will have to report every important transaction. This step will not only increase transparency but will also help in understanding and controlling risks in the currency market.
To strengthen its hold on global trading of rupee, the Reserve Bank of India (RBI) has announced an important regulatory change. The central bank has directed banks to do detailed reporting of offshore rupee-based derivative contracts entered into by their group companies. This system will be implemented in a phased manner from July 2027 and will become fully effective by 2028. Till now, RBI's monitoring was mainly limited to domestic markets, but under the new rules, deals in foreign markets, especially in segments like Non-Deliverable Forward (NDF), will also be tracked. This will bring transparency in determining the actual value of the rupee and the impact of foreign markets can be understood in a better way.
New rules of RBI
According to RBI, the main objective of this step is to increase the quality of data in the forex market and make pricing more accurate. For this, banks will have to share important information like notional value of the contract, maturity, counterparty and currency structure. This will make it easier to understand where the risk related to the rupee is originating and how it is being transferred. Keeping in mind the operational challenges raised by the banks, RBI has also given some relief. For example, contracts with a notional value of less than $1 million are exempt from reporting. Apart from this, back-to-back transactions have also been kept out of this scope.
Reporting responsibility will not be limited to Indian entities only, but offshore parties have also been allowed to provide data directly. With this, data of foreign branches and associate institutions can also be covered. Experts believe that this step is important towards creating a balance between the domestic and offshore currency markets. Till now, a large part of the value of the rupee has been determined outside India, due to which policy intervention was limited. RBI has clarified that it will be mandatory to report 70% data of total FX derivative transactions by July 2027, 80% by January 2028 and 100% by July 2028.
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