RBI Announces Regulatory Measures for the Foreign Exchange Market

In view of the evolving conditions and to ensure orderly functioning of the foreign exchange market, the Reserve Bank of India has today issued two circulars - A.P. (DIR Series) Circular No. 25 and A.P. (DIR Series) Circular No. 26 announcing the following regulatory measures. Restrictions on rebooking of cancelled foreign exchange derivative contracts: Authorised Dealers shall not permit users to rebook any foreign exchange derivative contract involving INR, whether deliverable or non-deliverable, which has been cancelled with any Authorised Dealer after the issuance of the Directions. Rollover of foreign exchange derivative contracts on maturity shall continue to be permitted, subject to compliance with the extant regulatory provisions. Reduction in the threshold for undertaking foreign exchange derivative transactions without establishing underlying exposure: The existing threshold of USD 100 million equivalent for undertaking foreign exchange derivative transactions to hedge contracted exposures without establishing the existence of the underlying exposure has been reduced to USD 5 million equivalent, across all Authorised Dealers. The corresponding threshold for taking positio

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