RBI eases forward contract cancellation and rebooking rules
Current · Source: Reserve Bank of India · RBI/2013-2014/446 · issued 13 Jan 2014 · ~2 min read
Quick answerRBI now allows free cancellation and rebooking of forward contracts for all current account and capital account transactions with residual maturity up to one year. Earlier, exporters and importers had partial limits; FIIs/QFIs get a 10% rebooking cap on cancelled contracts.
The rule, in the simplest words
Banks can now let customers cancel and rebook forward contracts (agreements to buy or sell foreign money at a fixed future price) that end within one year, for almost any business reason.
Before this rule, only exporters could cancel and rebook up to 50% of their contracts, and importers up to 25%. Now there is no limit for contracts that end within one year.
For foreign investors like FIIs/QFIs (foreign funds that invest in Indian stocks), if they cancel a forward contract, they can only rebook up to 10% of the cancelled amount. But they can roll over (extend) the contract before it ends.
Banks must update their own rules and tell their customers, like exporters and importers, about this new freedom to cancel and rebook without old limits.
How it plays out — a real example
A forex & trade-finance officer in Indore helps a local exporter who sold gold jewelry to a buyer in the US. The exporter had booked a forward contract to lock in the dollar rate for 6 months. Now, if the dollar rate moves favorably, the exporter can cancel that contract and rebook a new one at a better rate, without any penalty or limit, because the contract ends within one year. The officer simply processes the cancellation and rebooking in the bank's system, making the exporter happy with the extra profit.
What changed
Previously, forward contracts involving INR for current and capital account transactions could not be freely cancelled and rebooked; only exporters (50% limit) and importers (25% limit) had partial flexibility. Now, for all contracted exposures, forward contracts with residual maturity of one year or less can be freely cancelled and rebooked. For FIIs/QFIs/other portfolio investors, cancelled forward contracts can be rebooked up to 10% of the cancelled value, and contracts can be rolled over on or before maturity.
What it means for you
Banks can offer greater operational flexibility to corporate clients hedging current and capital account exposures, as the earlier restrictive limits on cancellation and rebooking are removed for short-tenor contracts. This simplifies hedging for importers and exporters and reduces compliance burden. For FIIs/QFIs, the 10% rebooking cap remains, but the ability to roll over contracts provides continuity. Banks must update their internal systems and advisory processes to reflect these liberalized rules.
What you must do
Update internal risk management policies to allow free cancellation and rebooking of forward contracts with residual maturity up to one year for all current and capital account transactions.
Communicate the revised guidelines to corporate clients, especially exporters and importers, highlighting the removal of earlier percentage limits.
Ensure FII/QFI clients are informed about the 10% rebooking cap on cancelled contracts and the rollover facility.
Train treasury and forex desk staff on the new rules to avoid misapplication of old limits.
Who it affects
AD Category-I banks, Exporters and importers with contracted exposures, FIIs, QFIs, and other portfolio investors, Corporate treasuries managing forex risk
❓ Common questions
Can all forward contracts now be freely cancelled and rebooked?
No, only forward contracts with residual maturity of one year or less for contracted exposures in current account and capital account transactions are eligible. Longer-tenor contracts remain subject to earlier restrictions.
What is the rebooking limit for FIIs/QFIs after cancellation?
FIIs/QFIs/other portfolio investors can rebook up to 10% of the value of forward contracts that have been cancelled. They can also roll over contracts on or before maturity without cancellation.
Does this circular affect existing forward contracts booked before January 13, 2014?
The circular applies prospectively from its date. Existing contracts continue under the rules in place at the time of booking, but banks should advise clients on the new flexibility for new contracts.
📜 Read the original circular — full text as issued by RBI
RBI/2013-2014/446
A.P. (DIR Series) Circular No. 92
January 13, 2014
All Category - I Authorised Dealer banks
Madam/Sir,
Risk Management and Inter Bank Dealings
Attention of Authorised Dealers Category-I (AD Category-I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 ( Notification No. FEMA/25/RB-2000 dated May 3, 2000 ) as amended from time to time and A.P. (DIR Series) Circular no. 58 dated December 15, 2011 , A.P. (DIR Series) Circular no. 13 dated July 31, 2012 and A.P. (DIR Series) Circular no 36 dated September 4, 2013 .
2. Under the extant regulations, the facility of cancellation and rebooking is not permitted for forward contracts, involving Rupee as one of the currencies, booked by residents to hedge current and capital account transactions. However, exporters are allowed to cancel and rebook forward contracts to the extent of 50 per cent of the contracts booked in a financial year for hedging their contracted export exposures and importers are allowed to cancel and rebook forward contracts to the extent of 25 percent of the contracts booked in a financial year for hedging their contracted import exposures.
3. On a review of the evolving market conditions and with a view to providing operational flexibility in respect of current and capital account transactions, it has been decided to allow, in case of contracted exposures, forward contracts in respect of all current account transactions as well as capital account transactions with a residual maturity of one year or less to be freely cancelled and rebooked. As far as the exposure of the FIIs/QFIs/other portfolio investors is concerned, forward contracts booked by these investors, once cancelled, can be rebooked up to the extent of 10 per cent of the value of the contracts cancelled. The forward contracts booked by these investors may, however, be rolled over on or before maturity.
4. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers.
5. 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,
(CD Srinivasan)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-2014/446 · issued 13 Jan 2014. The plain-English explanation above is BankPulse’s own independent summary.
Update internal risk management policies to allow free cancellation and rebooking of forward contracts with residual maturity up to one year for all current and capital account transactions.
Train treasury and forex desk staff on the new rules to avoid misapplication of old limits.
📜 Compliance
Communicate the revised guidelines to corporate clients, especially exporters and importers, highlighting the removal of earlier percentage limits.
Ensure FII/QFI clients are informed about the 10% rebooking cap on cancelled contracts and the rollover facility.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (AD Category-I banks, Exporters and importers with contracted exposures, FIIs, QFIs, and other portfolio investors, Corporate treasuries managing forex risk), your first concrete step on “RBI eases forward contract cancellation and rebooking rules” is: “Update internal risk management policies to allow free cancellation and rebooking of forward contracts with residual maturity up to one year for all current and capital account transactions.” (RBI issued this 13 Jan 2014).
Action required: Update internal risk management policies to allow free cancellation and rebooking of forward contracts with residual maturity up to one year for all current and capital account transactions.
Action required: Communicate the revised guidelines to corporate clients, especially exporters and importers, highlighting the removal of earlier percentage limits.
Action required: Ensure FII/QFI clients are informed about the 10% rebooking cap on cancelled contracts and the rollover facility.
Action required: Train treasury and forex desk staff on the new rules to avoid misapplication of old limits.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
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.
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=8691&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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