Current · Source: Reserve Bank of India · RBI/2026-27/14 · issued 20 Apr 2026 · ~1 min read
Quick answerRBI has withdrawn its April 1, 2026 circular and now prohibits authorised dealers from entering into any INR foreign exchange derivative contracts with related parties, except for rollovers/cancellations and back-to-back deals with non-related non-resident users. Effective immediately from the date of the circular.
The rule, in the simplest words
Banks cannot make new deals to trade foreign money (like dollars) for Indian rupees with their own related parties (companies or people they have a special connection with, like sister companies or family members).
Banks can only cancel or roll over (extend the end date) existing deals with related parties; they cannot start any new ones.
Banks can still do back-to-back deals (matching a customer's trade with another bank) with unrelated customers who live outside India.
Related parties are defined by accounting rules called Ind AS 24 (a list of connected people or companies that a bank must report).
This rule starts right away, from April 20, 2026.
How it plays out — a real example
A forex & trade-finance officer in Mumbai, Priya, checks her bank's list of related parties and sees that a sister company, ABC Finance, is on it. She tells her team to stop offering any new dollar-rupee swap deals to ABC Finance, but she allows them to roll over an existing contract that ends next month, as the rule permits.
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RBI has withdrawn the instructions issued via A.P. (DIR Series) Circular No. 03 dated April 1, 2026.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)
❓ Common questions
When does this circular take effect?
The instructions are applicable with immediate effect from the date of the circular.
📜 Read the original circular — full text as issued by RBI
RBI/2026-27/14
A.P. (DIR Series) Circular No. 07
April 20, 2026
To,
All Authorised Dealers
Madam/Sir,
Risk Management and Inter-Bank Dealings
Attention of Authorised Dealers is invited to the A.P. (DIR Series) Circular No. 24 dated March 27, 2026 , the A.P. (DIR Series) Circular No. 03 dated April 01, 2026 , and the Master Direction - Risk Management and Inter-Bank Dealings dated July 05, 2016 , as amended from time to time.
2. On a review, it has now been decided to withdraw the instructions issued vide A.P. (DIR Series) Circular No. 03 dated April 01, 2026 . Further, it has been decided that Authorised Dealers shall not undertake any foreign exchange derivative contract involving INR with their related parties except for the following:
(i) cancellation and rollover of existing contracts; and
(ii) transactions undertaken with non-related non-resident users on a back-to-back basis in terms of the Master Direction - Risk Management and Inter-Bank Dealings dated July 05, 2016 , as amended from time to time.
3. ‘Related parties’ shall have the same meaning as assigned to it under the Indian Accounting Standard (Ind AS) 24 – Related Party Disclosures or International Accounting Standard (IAS) 24 – Related Party Disclosures or any other equivalent accounting standards.
4. These instructions shall be applicable with immediate effect.
5. The directions contained in this circular have been issued under 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/2026-27/14 · issued 20 Apr 2026. The plain-English explanation above is BankPulse’s own independent summary.
Update internal compliance policies and systems to flag and block prohibited related-party FX derivative deals.
📜 Compliance
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.
Train dealing room staff and compliance teams on the revised restrictions and the two permitted exceptions.
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 Compliance officer at a bank this circular applies to (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)), your first concrete step on “RBI curbs related-party FX derivatives with INR” is: “Identify all related parties as per Ind AS 24 or equivalent accounting standards within your institution.” (RBI issued this 20 Apr 2026).
Circular: RBI/2026-27/14 -- RBI curbs related-party FX derivatives with INR
Issued: 20 Apr 2026
Action required: Identify all related parties as per Ind AS 24 or equivalent accounting standards within your institution.
Action required: Cease entering into any new INR foreign exchange derivative contracts with these related parties immediately.
Action required: Review existing contracts with related parties and ensure only cancellations or rollovers are processed; no new transactions.
Action required: Update internal compliance policies and systems to flag and block prohibited related-party FX derivative deals.
Action required: Train dealing room staff and compliance teams on the revised restrictions and the two permitted exceptions.
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 02 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=13373&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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