RBI Allows Related Party Forex Hedging up to $100 mn

Current Context: On April 20, 2026, RBI eased its April 1 forex derivative restrictions to balance risk management with rupee stability.

• Banks are now permitted to undertake back‑to‑back hedging transactions, even with related parties such as overseas branches.
• The USD 100 million Net Open Position cap remains unchanged, ensuring limits on unhedged exposure.
• Existing trades within the cap no longer require forced unwinding, allowing them to run to maturity or be modified.
• RBI has allowed cancellation and rollover of related‑party contracts, despite general restrictions on new deals.
• The move provides operational relief for banks and corporates, while retaining guardrails against speculative flows.
• Overall, this calibrated step supports genuine hedging needs and helps maintain rupee stability in volatile markets.

Question:

Q.1 Which of the following remains unchanged under RBI’s revised forex derivative norms?
a) Foreign investment cap
b) Repo rate
c) USD 100 million Net Open Position (NOP) cap
d) Cash Reserve Ratio (CRR)

Answer: c) RBI retained the USD 100 million Net Open Position cap to ensure banks do not take excessive unhedged forex exposure, maintaining safeguards against systemic risks.