RBI allows gold price hedging in IFSC for resident entities
Current · Source: Reserve Bank of India · RBI/2022-23/151 · issued 12 Dec 2022 · ~2 min read
Quick answerRBI now permits eligible resident entities to hedge gold price risk on IFSC exchanges, reversing a prior ban. This aligns with the December 07, 2022 monetary policy statement and updates the 2018 commodity hedging directions.
The rule, in the simplest words
Resident entities in India can now hedge gold price risk on IFSC exchanges.
Eligible entities must comply with FEMA provisions under Sections 10(4) and 11(1).
Lenders must update their compliance frameworks to align with the new Master Direction.
How it plays out — a real example
Ava, a forex & trade-finance officer in Indore, can now help her clients hedge their gold price risk on IFSC exchanges, reducing their reliance on domestic hedging avenues and potentially lowering costs. Ava will ensure that her clients comply with FEMA provisions and update their internal policies to permit eligible clients to hedge gold price risk on IFSC exchanges.
What changed
Previously, resident entities in India were barred from hedging gold price risk in overseas markets. Now, RBI has allowed eligible entities to hedge this risk on exchanges in the International Financial Services Centre (IFSC) recognized by the IFSCA. The change was announced via a circular dated December 12, 2022, following the bi-monthly monetary policy statement.
What it means for you
Banks and their clients can now use IFSC-based exchanges to manage gold price exposure, reducing reliance on domestic hedging avenues. This opens a new channel for gold price risk management, potentially lowering costs and increasing flexibility for eligible entities. Lenders must update their compliance frameworks to align with the new Master Direction issued on the same date.
What you must do
Review the new Master Direction on hedging commodity price risk and freight risk in overseas markets issued on December 12, 2022.
Update internal policies to permit eligible clients to hedge gold price risk on IFSC exchanges.
Ensure all hedging transactions comply with FEMA provisions under Sections 10(4) and 11(1).
Train staff on the revised eligibility criteria and documentation requirements for gold hedging.
Who it affects
Authorised Dealer Category – I Banks, Resident entities with gold price exposure, IFSC exchanges and clearing houses
❓ Common questions
Can all resident entities now hedge gold price risk overseas?
No, only eligible entities as defined in the new Master Direction can hedge on IFSC exchanges recognized by IFSCA. The circular does not specify all eligibility criteria, so refer to the Master Direction.
Does this circular replace the 2018 hedging directions?
Yes, the 2018 directions are superseded by the new Master Direction issued on December 12, 2022, which incorporates this change.
What legal basis does this circular have?
It is issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, and does not override other applicable laws.
📜 Read the original circular — full text as issued by RBI
RBI/2022-23/151
A. P. (DIR Series) Circular No. 19
December 12, 2022
All Authorised Dealer Category – I Banks
Madam / Sir,
Hedging of Gold Price Risk in Overseas Markets
Please refer to Paragraph 4 of the Statement on Developmental and Regulatory Policies announced as a part of the Bi-monthly Monetary Policy Statement for 2022-23 dated December 07, 2022 regarding hedging of price risk of gold in overseas markets. Attention is also invited to the Hedging of Commodity Price Risk and Freight Risk in Overseas Markets (Reserve Bank) Directions, 2018 dated March 12, 2018 , as amended from time to time.
2. Resident entities in India are currently not permitted to hedge their exposure to price risk of gold in overseas markets. On a review, it has been decided to permit eligible entities to hedge their exposure to price risk of gold on exchanges in the International Financial Services Centre (IFSC) recognised by the International Financial Services Centres Authority (IFSCA).
3. The Master Direction – Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022 ( A. P. (DIR Series) Circular No. 21 dated December 12, 2022 ) have been issued today and are enclosed herewith.
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,
(Dimple Bhandia)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2022-23/151 · issued 12 Dec 2022. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (Authorised Dealer Category – I Banks, Resident entities with gold price exposure, IFSC exchanges and clearing houses), your first concrete step on “RBI allows gold price hedging in IFSC for resident entities” is: “Review the new Master Direction on hedging commodity price risk and freight risk in overseas markets issued on December 12, 2022.” (RBI issued this 12 Dec 2022).
Circular: RBI/2022-23/151 -- RBI allows gold price hedging in IFSC for resident entities
Issued: 12 Dec 2022
Action required: Review the new Master Direction on hedging commodity price risk and freight risk in overseas markets issued on December 12, 2022.
Action required: Update internal policies to permit eligible clients to hedge gold price risk on IFSC exchanges.
Action required: Ensure all hedging transactions comply with FEMA provisions under Sections 10(4) and 11(1).
Action required: Train staff on the revised eligibility criteria and documentation requirements for gold hedging.
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=12423&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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