RBI tightened the rules on rupee hedges and cancelled forex contracts

What's going on here?

On 10 October 2026, the Reserve Bank of India issued two foreign-exchange circulars aimed at the rupee derivatives market. Authorised dealers may no longer let users rebook a cancelled rupee contract, whether deliverable or not, with any bank in India. Rollovers at maturity stay allowed under existing rules. The RBI also slashed the size at which firms can hedge contracted exposures without proving the underlying: from $100 million equivalent to $5 million across all dealers, and the same cap now applies to exchange-traded currency derivatives on recognised bourses.

What does this mean?

Large exporters and importers often run layered hedges across banks. The new undertaking rule forces them to confirm the same exposure is not hedged twice. That closes a loophole regulators worry can mask speculative positions. The $5 million gate means mid-sized corporates must show paperwork sooner, not only the biggest houses. For notionals above $2 million on certain rupee purchases against the dollar, dealers must set aside a Foreign Exchange Risk Reserve: 20% of the rupee equivalent as cash at the RBI. That raises the cost of running big books and should discourage casual use of the hedge window.

Why should I care?

If you run treasury at an importer or IT services firm, refresh your hedge policy and dealer agreements this week. Duplicate hedges and cancelled-then-rebooked trades are now compliance risks, not shortcuts. Retail investors rarely trade these products directly, but tighter rules can nudge corporates toward simpler forwards and away from stacked derivatives, which sometimes feeds into reported hedging costs in earnings calls. Watch whether the rupee volatility that prompted the step eases once the reserve rule bites.