Master Direction - Risk Management and Inter-Bank Dealings (Updated as on September 22, 2025)
UR
- Applies toAll regulated entities
- StatusIn force
- RBI text changedRBI updated this document on October 01, 2026. BankPulse is re-reading it. BankPulse checked 41 points against RBI's new text on 11 October 2026. 40 stand. 1 are marked below and are being re-read.
- IssuedJul 05, 2016
- Amendmentsnone tracked
- Length41 points in 3 sections · 4 min read
The four dates on this rule
- PublishedJul 05, 2016The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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18 of the 41 points name no product and bind every product. All products.
Numbers to remember
| ₹500 crore | A user counts as non-retail with net worth of ₹500 crore or turnover of ₹1000 crore. RBI Section I §2.1(ii) |
| twelve months | Exchange-traded currency derivative contracts run for up to twelve months. RBI Section I §3.2(iv) |
| six months | Forward gold contracts with jewellers and exporters may run for up to six months. RBI Section III §2 |
| 12 per cent | To borrow further, the bank must maintain a CRAR of 12 per cent. RBI Part C §5(f) |
| three years | Extra borrowing beyond the ceiling must carry a minimum maturity of three years. RBI Part C §5(f) |
| 25 per cent | The Net Overnight Open Position Limit may not exceed 25 per cent of total capital. RBI Annex I A.i |
What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Can be read two ways
A point marked this way sits on an RBI paragraph that can honestly be read two ways. Our own sentence takes one of the two. BankPulse does not choose for you: read RBI’s own paragraph, at the number printed on the point, before you act on it.
Two ways — both, or either one. RBI’s paragraph joins two things in the and-or form. One reading: Both of them apply, together. The other: Either one of them, on its own, is enough.
Must know
1. Users are retail or non-retail
Your bank must classify every user as retail or non-retail before offering forex derivatives.
2. Net worth sets non-retail status
A user counts as non-retail with net worth of ₹500 crore or turnover of ₹1000 crore.
3. Otherwise, the user is retail
Any user who does not qualify as non-retail is classified as retail by default.
4. Retail users get simpler products
Retail users may only be offered basic forwards, swaps, and European options.
5. USD 100 million hedge limit
A user can hedge up to USD 100 million without proving the underlying exposure exists.
6. Gains paid at cash flow
Gains on a hedge for a future deal are paid out only when that cash flow happens.
7. Mid-market mark must be shown
Your bank must give retail users the mid-market mark before they sign a derivative deal.
8. Only seven currency pairs allowed
Exchange-traded currency derivatives are permitted only for these listed currency pairs.
9. Tenor capped at twelve months
Exchange-traded currency derivative contracts run for up to twelve months.
10. ETCD cap: USD 100 million
Exchange-traded currency positions are capped at USD 100 million without proof of exposure.
11. Gold contracts capped 6 months
Forward gold contracts with jewellers and exporters may run for up to six months.
12. Foreign banks must swap capital
A foreign bank's Tier I capital funds must stay swapped into rupees, not parked in nostro.
13. Board sets treasury policy
Your board must set an appropriate policy and fix limits for treasury functions.
14. NDDCs need an IFSC unit
Only a bank with an IFSC Banking Unit may trade non-deliverable derivative contracts.
15. Board sets forex balance ceiling
Your bank may hold foreign currency balances only up to levels the board approves.
16. Nostro overdraft borrowing cap
Overseas borrowings, including a 5-day nostro overdraft, are capped at 100% of Tier I capital or USD 10 million.
17. Extra borrowing needs board policy
Extra overseas borrowing above 50% of Tier I capital needs the board's own risk policy.
18. CRAR must stay above 12%
To borrow further, the bank must maintain a CRAR of 12 per cent.
19. Three-year minimum maturity beyond ceiling
Extra borrowing beyond the ceiling must carry a minimum maturity of three years.
20. SPD overseas borrowing, operational only
Standalone Primary Dealers may borrow abroad only for operational reasons, within their own cap.
21. NOOPL capped at 25%
The Net Overnight Open Position Limit may not exceed 25 per cent of total capital.
22. Offshore branches not netted onshore
Offshore exposure is calculated separately and never netted against onshore positions.
23. AGL capped at 6x capital
The Aggregate Gap Limit may not exceed six times the bank's total capital.
Do it
1. Must still hold real exposure
The user must still keep proof of a real, unhedged exposure ready if asked.
2. Report open position to RBI
The bank must tell RBI its open position and gap limits once the board approves them.
3. Overdraft breach: 15-day report
An overdraft not adjusted within five days must be reported to the Reserve Bank.
4. Daily FTD/GPB report due
Send daily FTD and GPB turnover reports to RBI by the following working day.
5. Quarterly exposure report by 30th
Send quarterly foreign exchange exposure details to RBI by the 30th of next month.
6. Weekly option report due
Send weekly option-transaction reports to RBI by the first working day of next week.
7. Monthly overseas borrowings, 10th deadline
Report total overseas foreign-currency borrowings to RBI by the 10th of each month.
8. Fortnightly BAL statement due
File the BAL foreign-currency holdings statement within seven calendar days of each fortnight's close.
9. Report suspicious quarterly hedges
Report doubtful hedge cancellations by non-resident clients to RBI every quarter.
10. Hourly Trade Repository batches
Report inter-bank INR forex deals to the Trade Repository within thirty minutes each hour.
11. Non-INR trades reported by 5:30pm
Report inter-bank non-INR forex deals made by 5pm to the Trade Repository by 5:30pm.
12. Currency swaps reported same day
Report inter-bank currency swaps to the Trade Repository before the platform closes that day.
13. Client trades reported by noon
Report client foreign exchange derivative deals to the Trade Repository before noon next day.
14. Yield-curve choice needs ALCO policy
Your bank needs an ALCO-approved policy on which yield curve it uses, applied consistently.
15. ALCO monitors limit adherence
ALCO or Internal Audit must monitor how these forex limits are used and followed.
16. Breaches must be regularised
Any technical breach of the NOP-INR limit must be regularised by ALCO or Internal Audit.
Background
1. Who counts as Authorised Person
Authorised Persons include your bank, standalone primary dealers, and recognised stock exchanges.
2. Branch positions net together
RBI's own example nets branch positions: plus 15, plus 5 and minus 12 crore make 20 crore.