TREE NEWS update: The Reserve Bank of India said authorised dealers may offer non-resident users non-deliverable derivative contracts involving the Indian rupee only for hedging purposes. The central bank set the foreign exchange risk premium at 20% of the notional rupee-equivalent amount of each derivative contract. The forward rate method applies to all rupee-linked FX derivative contracts in which authorised dealers buy foreign currency against the rupee.
India central bank restricts rupee non-deliverable derivatives to hedging only
AI take
The RBI's move narrows the rupee NDF market to a hedging-only channel, which matters most for offshore participants who have used these contracts for positioning rather than pure risk management. The 20% risk premium effectively raises the cost of that access, so the significance lies less in the headline restriction than in how much offshore liquidity migrates to other instruments or venues. Whether onshore forwards absorb that activity, and whether the premium is revised, are the open questions worth watching.
Generated by AI for reference only.
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