RBI tightens rupee NDF rules and widens cash reserve rule
In short
The Reserve Bank of India tightened rules on rupee non-deliverable derivative contracts on Monday. Overseas clients can now use them only for hedging, and a 20% cash reserve rule was widened to banks’ own rupee currency hedges.
This matters for banks and overseas clients that use these contracts. The reporting does not say how much trading will change or what the effect on the rupee will be.
What the reporting says
The Reserve Bank of India on Monday tightened rules on rupee non-deliverable derivative contracts and widened a 20% cash reserve requirement to banks' own rupee currency hedges. The reporting says overseas clients will be limited to using such contracts only for hedging. The immediate consequence is tighter oversight of these trades, while the full market impact is not stated in the available reporting.
Why it matters
The Reserve Bank of India tightened rules on rupee non-deliverable derivative contracts and broadened a 20% cash reserve requirement to banks' own rupee currency hedges. Overseas clients were limited to hedging use only. This affects banks and market participants that use rupee derivatives, but the reporting does not state the expected size of the impact on trading volumes or the currency.