SPDs Now Allowed in Non-Deliverable Rupee Derivatives
Current · Source: Reserve Bank of India · RBI/2025-26/78 · issued 22 Sep 2025 · ~2 min read
Quick answerRBI now permits Standalone Primary Dealers (AD Cat-III) to transact in non-deliverable rupee derivative contracts (NDDCs) with residents and non-residents, effective immediately. This expands the eligible participant base beyond IFSC Banking Units.
The rule, in the simplest words
Standalone Primary Dealers (SPDs) can now trade in non-deliverable rupee derivative contracts (NDDCs) with residents and non-residents.
SPDs are now eligible to offer NDDCs, in addition to AD Cat-I banks operating IFSC Banking Units.
The Master Direction has been updated to include SPDs in relevant paragraphs.
How it plays out — a real example
A treasury officer in Indore, working for a Standalone Primary Dealer, can now offer non-deliverable rupee derivative contracts to clients, expanding the bank's revenue stream and providing clients with more hedging options. This is a result of the RBI's decision to permit SPDs to trade in NDDCs, increasing liquidity and competition in the market.
What changed
Previously, only AD Cat-I banks operating IFSC Banking Units (IBUs) could transact in rupee NDDCs. Now, Standalone Primary Dealers authorized as AD Cat-III are also eligible to offer these contracts to both residents and non-residents. The Master Direction has been updated to include SPDs in relevant paragraphs.
What it means for you
Banks and lenders can now see increased liquidity and competition in the rupee NDDC market as SPDs enter. This may lead to tighter pricing and more hedging options for clients. SPDs themselves gain a new revenue stream and can better manage their own forex risk.
What you must do
Update internal risk management policies to include SPDs as counterparties in NDDCs.
Review and amend any existing agreements with SPDs to reflect their new eligibility.
Train dealing room staff on the expanded participant list for rupee NDDCs.
Monitor market developments for potential pricing changes due to SPD participation.
Who it affects
Standalone Primary Dealers (AD Cat-III), AD Cat-I banks with IFSC Banking Units, Resident and non-resident clients seeking rupee NDDCs, Risk management and treasury departments of authorized persons
❓ Common questions
What exactly are non-deliverable derivative contracts (NDDCs) involving the Rupee?
These are derivative contracts where the settlement is in a foreign currency (typically USD) rather than in rupees, used for hedging or speculation when onshore rupee delivery is restricted or not preferred.
Do SPDs need any additional approval to start transacting in these NDDCs?
No, the circular states these instructions are effective immediately. SPDs already authorized as AD Cat-III under FEMA can begin transacting without further RBI approval, provided they comply with the updated Master Direction.
Does this circular affect existing NDDC transactions by AD Cat-I banks?
No, existing permissions for AD Cat-I banks operating IBUs remain unchanged. The circular only adds SPDs as eligible participants, expanding the market.
📜 Read the original circular — full text as issued by RBI
RBI/2025-26/78
A. P. (DIR Series) Circular No. 10
September 22, 2025
To,
All Authorised Persons
Madam/Sir,
Participation of Standalone Primary Dealers in Non-deliverable Rupee Derivative Markets
Attention of Authorised Persons is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 03, 2000 [ Notification no. FEMA.25/RB-2000 dated May 03, 2000 ], as amended from time to time and the Master Direction - Risk Management and Inter-Bank Dealings dated July 05, 2016 , as amended from time to time (hereinafter referred as ‘Master Direction’).
2. Authorised Dealer Category-I (AD Cat-I) banks in India operating an International Financial Services Centre (IFSC) Banking Unit (IBU), have been permitted under the Master Direction to transact in non-deliverable derivative contracts (NDDCs) involving the Rupee with users, other AD Cat-I banks operating an IBU and banks overseas. On a review, it has been decided that Standalone Primary Dealers (SPDs) authorised as Authorised Dealer Category–III (AD Cat-III), shall also be eligible to transact in NDDCs involving the Rupee.
3. These instructions shall be applicable with immediate effect. The Master Direction has been updated as under:
(i) In paragraph 2.2(vi) of Part-A (Section-I), at the end of the existing paragraph, the following words shall be added, namely: -
“Such transactions can also be offered to residents and non-residents by Standalone Primary Dealers authorised as Authorised Dealer Category-III.”
(ii) In paragraph 2.3(iii) of Part-A (Section-I), after the words “ IFSC Banking Unit ” , the following words shall be inserted, namely: -
“and Standalone Primary Dealers authorised as Authorised Dealer Category-III”
(iii) In paragraph 3A of Part-C, after the words “( as amended from time to time) ”, the following words shall be inserted, namely: -
“and Standalone Primary Dealers authorised as Authorised Dealer Category-III”
(iv) In paragraph 3A of Part-C, after the words “ having IBUs ” , the following words shall be inserted, namely: -
“Standalone Primary Dealers authorised as Authorised Dealer Category-III”
4. For the purpose of this circular, Authorised Persons shall mean AD Cat-I banks and SPDs authorised as AD Cat-III under Section 10 (1) of the Foreign Exchange Management Act (FEMA), 1999.
5. The directions contained in this circular have been issued under Section 45W of the Reserve Bank of India Act, 1934 and Sections 10(4), 11(1) and 11(2) of the FEMA, 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/2025-26/78 · issued 22 Sep 2025. The plain-English explanation above is BankPulse’s own independent summary.
Update internal risk management policies to include SPDs as counterparties in NDDCs.
📜 Compliance
Review and amend any existing agreements with SPDs to reflect their new eligibility.
Train dealing room staff on the expanded participant list for rupee NDDCs.
Monitor market developments for potential pricing changes due to SPD participation.
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 Branch Manager at a bank this circular applies to (Standalone Primary Dealers (AD Cat-III), AD Cat-I banks with IFSC Banking Units, Resident and non-resident clients seeking rupee NDDCs, Risk management and treasury departments of authorized persons), your first concrete step on “SPDs Now Allowed in Non-Deliverable Rupee Derivatives” is: “Update internal risk management policies to include SPDs as counterparties in NDDCs.” (RBI issued this 22 Sep 2025).
Circular: RBI/2025-26/78 -- SPDs Now Allowed in Non-Deliverable Rupee Derivatives
Issued: 22 Sep 2025
Action required: Update internal risk management policies to include SPDs as counterparties in NDDCs.
Action required: Review and amend any existing agreements with SPDs to reflect their new eligibility.
Action required: Train dealing room staff on the expanded participant list for rupee NDDCs.
Action required: Monitor market developments for potential pricing changes due to SPD participation.
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=12897&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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