What changed
Previously, intra-day open position limits for AD banks were not to exceed the Net Overnight Open Position Limit for rupee positions. Now, RBI has revised this to allow intra-day limits up to five times the Net Overnight Open Position Limit or the existing approved intra-day open position limit, whichever is higher.
What it means for you
Banks get more headroom to manage intra-day forex risk, especially in rupee pairs, without needing fresh approvals. This can improve liquidity and trading flexibility, but banks must still ensure robust risk management to avoid excessive exposure.
What you must do
- Update internal risk policies to reflect the new intra-day limit of five times the Net Overnight Open Position Limit or existing approved intra-day open position limit, whichever is higher.
- Ensure compliance with FEDAI circular SPL-58/Risk Mgmt./2011, which restricts these limits to positions involving the rupee.
- Monitor intra-day exposures closely to prevent breaching the revised limits and maintain adequate capital buffers.
Who it affects
Authorised Dealer Category - I banks, Forex dealers and treasury teams, Risk management departments
Does this circular apply to all currency pairs?
No, as per FEDAI circular SPL-58/Risk Mgmt./2011, the revised intra-day limit applies only to positions where the rupee is one of the currencies.
What is the effective date of this change?
The circular was issued on May 10, 2012, and is effective from that date.
Do we need RBI approval for the higher limit?
No, the circular sets the limit at five times the Net Overnight Open Position Limit or the existing approved limit, whichever is higher, so no fresh approval is needed if within these parameters.