RBI mandates 20% cash reserve on large INR forex hedges for current account payments
RBI FEMA Forex hedging RBI 10 October 2026 RBI has directed Authorised Dealers (banks) to maintain a Foreign Exchange Risk Reserve (FERR) of 20% of the INR notional value on forex derivative contracts above USD 2 million equivalent, where a user buys foreign currency against INR to hedge current account transactions. It applies to contracts undertaken after the issue of the circular dated October 10, 2026. In short Authorised Dealers must maintain FERR equal to 20% of the INR equivalent of the notional amount of each covered contract. Covers INR forex derivative contracts with users above USD two million equivalent, where the user purchases foreign currency against INR to hedge current account transactions. Reserve is held in cash in India with RBI, daily, until the contract terminates. Splitting deals across contracts or Authorised Dealers to avoid the threshold is a violation. Applies only to contracts undertaken after the circular's i...