Home › Circulars › RBI/2010-11/236

UCBs Allowed to Trade Currency Options on Exchanges as Clients

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2010-11/236 · issued 11 Oct 2010 · ~1 min read
Quick answerRBI now permits AD Category-I Primary (Urban) Cooperative Banks to participate in exchange-traded currency option markets solely as clients, for hedging underlying forex exposure from customer transactions, subject to specific approval.

What changed

RBI extended the guidelines on trading currency options on recognized stock/exchanges to AD Category-I UCBs. These banks can now participate in the exchange-traded currency option market only as clients, and only for hedging forex exposure arising from customer transactions. Participation requires prior specific approval from RBI's Urban Banks Department.

What it means for you

UCBs with AD Category-I license can now use exchange-traded currency options to hedge customer-driven forex risks, but cannot trade for proprietary purposes. This provides a new risk management tool for UCBs, but they must first obtain RBI approval and comply with all FED guidelines. Banks need to ensure their forex exposure is strictly from customer transactions to qualify.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Who it affects

AD Category-I Primary (Urban) Cooperative Banks, Urban Banks Department of RBI, SEBI-recognized stock/exchanges offering currency options

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

Can UCBs trade currency options for their own account?

No, participation is allowed only as clients and solely for hedging underlying forex exposure arising from customer transactions.

What is the process to start trading currency options?

UCBs must first obtain specific approval from RBI's Urban Banks Department, Central Office, Mumbai, after ensuring they meet all AD-I license norms.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #1605: UBD.BPD.(PCB).Cir.No.4/16.12.000/2010-11 — "Guidelines on Trading of Currency Options on Recognised Stock / New Exchanges - Participation of UCBs" dated Octob”
📜 Read the original circular — full text as issued by RBI
RBI/2010-11/236 UBD.BPD.(PCB). Cir. No  4 /16.12.000/2010-11 October 11, 2010 The Chief Executive Officer, All AD Category – I Primary (Urban) Cooperative Banks. Dear Sir, Guidelines on Trading of Currency Options on Recognised Stock / New Exchanges – Participation of UCBs Reserve Bank of India has issued Guidelines on Trading of Currency Options on Recognised Stock / New Exchanges vide A.P (DIR Series) Circular No.05 dated July 30, 2010 (copy enclosed).  Accordingly it has been decided to allow AD Category – I UCBs, fulfilling the norms for AD – I license (listed in Annexure I of Circular UBD.PCB.Cir No. 21/16.12.000/06-07 dated November 27, 2006) to participate in the exchange traded currency option market of a designated exchange recognized by SEBI, only as clients , subject to RBI (Foreign Exchange Department) Guidelines, referred to above. Participation will be allowed only for hedging underlying forex exposure arising from customer transactions. 2. UCBs which are authorized to undertake forex business as AD category – I and  desirous of participating in the exchange traded currency option market may approach Reserve Bank of India, Urban Banks Department, Central Office, Mumbai for specific approval in this regard. Yours faithfully (A. Udgata) Chief General Manager-In-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2010-11/236 · issued 11 Oct 2010. The plain-English explanation above is BankPulse’s own independent summary.
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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6044&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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