Banks seek RBI relief on 20% cash deposit for FX hedges
In short
Banks have asked the RBI to change the 20% cash deposit rule for some foreign-exchange hedges. The reports say they want a flat fee instead and want clarity on the $2 million threshold and on hedges linked to interest payments on foreign loans.
This matters because the rule can affect bank liquidity and the cost of hedging for businesses. The RBI has not said whether it will change the rule.
What the reporting says
Banks approached the RBI through a forex industry body seeking removal or change of the 20% cash deposit requirement for FX derivatives used to hedge current-account exposures, according to the publisher summaries. The reports say lenders want a flat fee instead and have also asked for clarity on the $2 million threshold and hedges tied to interest payments on foreign loans. The immediate issue is liquidity and compliance costs for banks and businesses, while the RBI response was not stated.
Why it matters
Banks approached the RBI through a forex industry body to seek changes to the 20% cash deposit mandate for FX derivatives used to hedge current-account exposures. The summary says lenders want a flat fee instead and want clearer treatment of the $2 million threshold and hedges related to foreign-loan interest payments. The request could affect liquidity and hedging costs for banks and clients, but the RBI’s response is not stated in the available reporting.