RBI Partially Rolls Back Rupee Derivative Curbs
The Reserve Bank of India has partially rolled back its recent emergency restrictions on rupee derivative trading after volatility in the currency market eased. The move signals a shift from crisis control toward restoring normal market activity, although some safeguards remain in place to prevent speculative pressure and distorted trades.
RBI Partially Eases Rupee Derivative Curbs
The central bank has withdrawn its April 1 directive that had stopped banks from offering non-deliverable forwards, or NDFs, which are offshore rupee derivatives settled in foreign currency. Banks have also been allowed again to let users rebook cancelled forward contracts. This rollback restores some flexibility to market participants who use derivatives for hedging currency risk.
Curbs On Related-Party Rupee Trades Still Remain
Even after the partial relaxation, the RBI has not fully removed all restrictions. Banks are still not allowed to enter into fresh rupee derivative contracts with related entities except in limited cases such as rollover or cancellation of existing trades and certain back-to-back deals with unrelated non-resident users. This shows the regulator is still concerned about trades that may artificially tighten liquidity or fuel speculative activity.
RBI Signals Return To Market Stability
The original tightening measures were introduced after the rupee weakened beyond 95 against the US dollar in late March. Since then, the rupee has recovered and has been trading in a narrower range. The central bank now appears to be balancing two goals: giving genuine hedgers more room to manage risk while keeping controls in place against circular or profit-driven trades that could destabilise the market again.
