Neutral impactForex
RBI’s new forex reserve rules explained: FAQs on the 20% requirement, $2 million threshold and exemptions
Mint 1 hr ago·15 Oct 2026, 5:02 pm
The Reserve Bank of India (RBI) has introduced a new rule requiring market participants to maintain a 20% Foreign Exchange Risk Reserve (FERR) for rupee-linked currency derivatives. This reserve acts as a buffer against potential losses from currency fluctuations. The central bank has also set a $2 million threshold for the value of outstanding positions, meaning transactions below this limit are exempt from the requirement.
This move is significant for investors as it increases the cost of trading currency derivatives, potentially reducing liquidity in the segment. It also introduces a new compliance burden for banks and financial institutions. For retail investors, this primarily impacts the pricing of products and the availability of certain hedging instruments.
Investors should watch for the RBI's detailed implementation guidelines and how market participants adjust their trading strategies in response to the new compliance costs. Keeping an eye on liquidity levels in the currency derivatives market will also be crucial.
Excerpt from Mint
The RBI has clarified how its 20% Foreign Exchange Risk Reserve requirement applies to rupee-linked currency derivatives, including the $2 million threshold, exemptions, cancellations and rollovers. The Reserve Bank of India (RBI) has clarified the scope of its new Foreign Exchange Risk Reserve (FERR) requirement,…Read the original at Mint
Key takeaways
- Category: Forex.
- Assessed as a significant, market-relevant update.
Why it matters
A meaningful update worth tracking. Use the price and stock snapshot to gauge how the market is responding.
