What changed
RBI has withdrawn the instructions issued via A.P. (DIR Series) Circular No. 03 dated April 1, 2026. In its place, a new restriction has been imposed: authorised dealers cannot undertake any foreign exchange derivative contract involving INR with their related parties, with only two exceptions—cancellation and rollover of existing contracts, and back-to-back transactions with non-related non-resident users as per the Master Direction.
What it means for you
Banks and authorised dealers must immediately stop entering into new INR forex derivative contracts with entities classified as related parties under Ind AS 24 or equivalent accounting standards. This tightens the regulatory framework to prevent potential conflicts of interest or misuse of related-party transactions in the forex market. Existing contracts can only be rolled over or cancelled, not extended or replaced with new ones.
What you must do
- Identify all related parties as per Ind AS 24 or equivalent accounting standards within your institution.
- Cease entering into any new INR foreign exchange derivative contracts with these related parties immediately.
- Review existing contracts with related parties and ensure only cancellations or rollovers are processed; no new transactions.
- Update internal compliance policies and systems to flag and block prohibited related-party FX derivative deals.
- Train dealing room staff and compliance teams on the revised restrictions and the two permitted exceptions.
Who it affects
Authorised dealers (banks) in India, Treasury and forex dealing desks, Compliance and risk management teams, Related parties of authorised dealers (as defined under Ind AS 24)
When does this circular take effect?
The instructions are applicable with immediate effect from the date of the circular.