RBI Cracks Down on ODI Structures Offering INR-Linked Products
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2012-13/481 · issued 25 Apr 2013 · ~2 min read
Quick answerRBI has clarified that overseas entities with Indian equity participation cannot offer financial products linked to the Indian rupee (like non-deliverable forex or index derivatives) without specific RBI approval, as this violates FEMA regulations.
What changed
RBI observed that Indian parties were using the ODI automatic route to set up overseas structures that trade currencies, securities, and commodities. Some of these structures began offering products linked to the Indian rupee, such as non-deliverable forex trades and Indian stock index derivatives. RBI has now clarified that such products require specific approval, and any violation will be treated as a contravention of FEMA.
What it means for you
Banks must ensure that their customers' ODI structures do not offer INR-linked products without RBI approval. This circular reinforces that the rupee's partial convertibility restricts offshore derivative activity tied to Indian markets. Non-compliance could lead to FEMA penalties for both the Indian party and the AD bank facilitating the transaction.
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
Review existing ODI proposals and structures of your customers to identify any INR-linked product offerings.
Advise customers that any overseas entity with Indian equity participation must obtain specific RBI approval before offering INR-linked financial products.
Report any suspected contraventions to RBI immediately to avoid regulatory action.
Update internal compliance checklists for ODI automatic route applications to flag INR-linked product risks.
Who it affects
Category-I Authorised Dealer Banks, Indian parties making overseas direct investments, Overseas entities with Indian equity participation
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-18 15:46 IST
Status change: withdrawn03 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What types of products are prohibited under this circular?
Products linked to the Indian rupee, such as non-deliverable trades involving foreign currency/rupee exchange rates and stock indices linked to the Indian market, are prohibited without specific RBI approval.
Does this apply to all overseas entities with Indian equity?
Yes, any overseas entity with direct or indirect equity participation from Indian parties is covered. They cannot offer INR-linked products without RBI's specific approval.
What are the consequences of non-compliance?
Any incidence of offering such products without approval will be treated as a contravention of FEMA regulations and will attract action under the relevant provisions of FEMA, 1999.
📜 Read the original circular — full text as issued by RBI
RBI/2012-13/481
A.P. (DIR Series) Circular No. 100
April 25, 2013
To
All Category-I Authorised Dealer Banks
Madam / Sir,
Overseas Direct Investments – Clarification
Attention of the Authorised Dealers (AD) is invited to Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 notified by the Reserve Bank vide Notification No. FEMA 120/RB-2004 dated July 07, 2004 and as amended from time to time.
2. It has been observed that eligible Indian parties are using overseas direct investments (ODI) automatic route to set up certain structures facilitating trading in currencies, securities and commodities. It has come to the notice of the Reserve Bank that such structures having equity participation of Indian parties have also started offering financial products linked to Indian Rupee (e.g. non-deliverable trades involving foreign currency, rupee exchange rates, stock indices linked to Indian market, etc.). It is clarified that any overseas entity having equity participation directly / indirectly shall not offer such products without the specific approval of the Reserve Bank of India given that currently Indian Rupee is not fully convertible and such products could have implications for the exchange rate management of the country. Any incidence of such product facilitation would be treated as a contravention of the extant FEMA regulations and would consequently attract action under the relevant provisions of FEMA, 1999.
3. AD - Category I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
4. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
Yours faithfully,
(Rashmi Fauzdar)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/481 · issued 25 Apr 2013. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7949&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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