The Reserve Bank of India has required authorised dealers to maintain a Foreign Exchange Risk Reserve for certain foreign exchange derivative contracts involving the Indian rupee. The requirement applies to contracts with a notional value exceeding USD 2 million equivalent that users enter into to hedge current account transactions involving the purchase of foreign currency against the rupee. The reserve must equal 20% of each contract’s notional amount in rupee terms and be held daily as cash with the Reserve Bank until the contract terminates. Authorised dealers must report reserve details each day through the Centralised Information Management System. Attempts by users to avoid the threshold through multiple transactions with one or more authorised dealers will constitute a violation. The requirements take effect immediately.
Reserve Bank of India imposes 20% cash reserve on certain INR foreign exchange derivatives exceeding USD 2 million
The Reserve Bank of India has imposed a 20% cash reserve on certain INR foreign exchange derivatives exceeding USD 2 million that hedge current account purchases of foreign currency. Authorised dealers must hold the reserve daily with the central bank until contract termination, report through its centralised system and prevent users from circumventing the threshold through multiple transactions.