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RBI Master Circular on Risk Management & Inter-Bank Dealings

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2013-14/5 · issued 27 Jun 2014 · ~2 min read

Quick answerRBI consolidated rules on forex derivatives, hedging, and inter-bank dealings for AD Category-I banks. Key updates include stricter documentation for underlying exposures, a 15-day document submission window, and a sunset clause making this circular valid only until July 1, 2014.

What changed

This Master Circular consolidates all existing instructions on risk management and inter-bank dealings into a single document, replacing earlier circulars. It introduces a sunset clause of one year, meaning the circular will be withdrawn on July 1, 2014, and replaced by an updated version. Key operational guidelines include a 15-day window for customers to submit underlying documents for forex contracts, with penalties for non-compliance.

What it means for you

Banks must ensure strict verification of underlying exposures for all forex derivative contracts, with a 15-day document submission deadline. Non-compliance by customers on more than three occasions in a financial year will require upfront document submission for future contracts. The sunset clause signals RBI's intent to regularly update these guidelines, so banks should stay prepared for annual revisions.

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

Verify underlying documents for all forex derivative contracts within 15 days of booking (for contracted exposures).
Cancel contracts and withhold exchange gains if documents are not submitted within 15 days (for contracted exposures).
Track customer compliance; after three failures in a financial year, require upfront document submission (for contracted exposures).
Prepare for the circular's withdrawal on July 1, 2014, and monitor for the updated version.
Ensure all staff handling forex derivatives are trained on these consolidated guidelines.

Who it affects

AD Category-I banks, Persons resident in India (other than AD Category-I banks) using forex derivatives

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-18 14:43 IST
Status change: withdrawn 03 Aug 2026, 04:00 IST

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

What happens if a customer fails to submit underlying documents within 15 days?

The contract must be cancelled, and any exchange gain should not be passed to the customer. If this happens more than three times in a financial year, future contracts require upfront document submission.

Is this circular still valid after July 1, 2014?

No, it has a sunset clause and stands withdrawn on July 1, 2014. RBI will issue an updated Master Circular to replace it.

Who is covered under 'Persons Resident in India other than Authorised Dealers Category-I'?

This includes all Indian residents except AD Category-I banks, such as corporates, individuals, and other entities that need to hedge foreign exchange exposure.

📜 Read the original circular — full text as issued by RBI

RBI/2013-14/5

 Master Circular No.5/2013-14

 (Updated as on June 27, 2014)

 July 1, 2013

 To,

 All Authorised Dealers - Category I Banks

 Madam / Sir,

 Master Circular on Risk Management and Inter-Bank Dealings

 Foreign Exchange Derivative Contracts, Overseas Commodity & Freight Hedging, Rupee Accounts of Non-Resident Banks, Inter-Bank Foreign Exchange Dealings, etc. are governed by the provisions in Notification No. FEMA 1/2000-RB , Regulation 4(2) of Notification No. FEMA 3/RB-2000 and Notification No. FEMA 25/RB-2000 dated May 3, 2000 and subsequent amendments thereto.

 2. This Master Circular consolidates the existing instructions on the subject of "Risk Management and Inter-Bank Dealings" at one place. The list of underlying circulars/notifications is set out in Appendix.

 3. This Master Circular is issued with a sunset clause of one year. This circular will stand withdrawn on July 1, 2014 and would be replaced by an updated Master Circular on the subject.

 Yours faithfully,

 ( B P Kanungo)

 Principal Chief General Manager 

 INDEX 

 PART – A

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/5 · issued 27 Jun 2014. 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=8121&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.