Home › Circulars › RBI/2013-14/127

RBI bans proprietary trading in currency futures/options by AD-I banks

Current · Source: Reserve Bank of India · RBI/2013-14/127 · issued 08 Jul 2013 · ~1 min read
Quick answerRBI has prohibited AD Category-I banks from proprietary trading in currency futures and exchange-traded currency options. All transactions in these markets must now be solely on behalf of clients, effective immediately until further notice.
The rule, in the simplest words
How it plays out — a real example

A treasury officer in Mumbai must now ensure all currency futures trades are done on behalf of clients, like a company looking to manage its currency risks, and not use the bank's own funds to speculate in the market. This means the officer will only execute trades as per client instructions, without taking any positions using the bank's capital. The officer must also verify the client's identity and comply with anti-money laundering rules for each trade.

What changed

Previously, AD Category-I banks could trade currency futures and options for their own account. Now, RBI has banned all proprietary trading in these instruments, restricting banks to client-only transactions. The change is effective from July 8, 2013, and remains in force until further orders.

What it means for you

Banks can no longer use their own capital to speculate in currency futures/options markets, reducing their risk exposure. This may lower market liquidity initially as banks shift to agency roles. Lenders must ensure all trades are client-driven and comply with KYC/AML norms.

What you must do

Who it affects

AD Category-I banks, Treasury departments of banks, Currency futures and options exchanges, Clients of AD Category-I banks

❓ Common questions

Regulatory timeline

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

Does this ban apply to all currency derivatives or only futures and options?

The circular specifically prohibits proprietary trading in currency futures and exchange-traded currency options. Other currency derivatives like forwards or swaps are not covered by this instruction.

Can banks still trade currency futures on behalf of their corporate clients?

Yes, banks can continue to execute client orders in currency futures and options markets, but they cannot trade for their own account.

Is there any end date for this restriction?

The circular states the ban is effective immediately and shall remain in force till further orders. No specific end date has been provided.

📜 Read the original circular — full text as issued by RBI
RBI/2013-14/127 A.P. (DIR Series) Circular No. 7 July 8, 2013 To, All Authorised Dealer Category - I Banks Madam / Sir, Risk Management and Inter Bank Dealings Attention of Authorized Dealers Category – I (AD Category – I) banks is invited to the A.P.(DIR Series) Circular No.129 dated May 21, 2012 regarding participation in Currency Futures / Exchange Traded Currency Options markets. 2. On a review of the evolving market conditions, it has been decided that AD Category – I banks should not carry out any proprietary trading in the currency futures / exchange traded currency options markets.  In other words, any transaction by the AD Category – I banks in these markets will have to be necessarily on behalf of their clients. 3. These instructions shall come in to effect immediately and shall be in force till further orders. 4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law. Yours faithfully, (Rudra Narayan Kar) Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/127 · issued 08 Jul 2013. The plain-English explanation above is BankPulse’s own independent summary.
🧰 Tools — save, print, templates & related
Most relevant forTreasury Team / ALMCompliance TeamRisk ManagementCorporate / Wholesale Banking RMTrade Finance / Forex OperationsInternal Audit
🛠 Banker’s toolkit — checklists & reply templates →
Related circulars · Foreign Exchange (FEMA)
RBI raises cash carry limit for travellers to Rs 7,500Rupee Value of Special Currency Basket Revised to Rs.60.897378ECB Policy Liberalised: Cost Ceilings Removed, NBFCs & Realty Get BoostECB: Integrated Township Exemption Removed, Cost Ceilings TightenedRBI Delegates Bank Guarantee Powers for Foreign Airlines to AD Banks
Browse all departments →
Who does what — compliance checklist
💻 IT / Systems
  • Update internal risk management policies and trading systems to reflect the ban.
📜 Compliance
  • Immediately cease all proprietary trading in currency futures and exchange-traded currency options.
  • Ensure all transactions in these markets are executed only on behalf of clients.
  • Train treasury and compliance teams on the new client-only mandate.
  • Review existing proprietary positions and unwind them in compliance with RBI guidelines.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks, Treasury departments of banks, Currency futures and options exchanges, Clients of AD Category-I banks), your first concrete step on “RBI bans proprietary trading in currency futures/options by AD-I banks” is: “Immediately cease all proprietary trading in currency futures and exchange-traded currency options.” (RBI issued this 08 Jul 2013).

  1. Circular: RBI/2013-14/127 -- RBI bans proprietary trading in currency futures/options by AD-I banks
  2. Issued: 08 Jul 2013
  3. Action required: Immediately cease all proprietary trading in currency futures and exchange-traded currency options.
  4. Action required: Ensure all transactions in these markets are executed only on behalf of clients.
  5. Action required: Update internal risk management policies and trading systems to reflect the ban.
  6. Action required: Train treasury and compliance teams on the new client-only mandate.
  7. Action required: Review existing proprietary positions and unwind them in compliance with RBI guidelines.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

💬 Banker Discussion

Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.

Loading comments…
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=8225&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.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
—