RBI
RBI restricts NDDCs, mandates 20% Foreign Exchange Risk Reserve
13 October 2026 · RBI
RBI has mandated that non-deliverable derivative contracts involving INR to non-resident users can only be offered for hedging, and introduced a 20% Foreign Exchange Risk Reserve on certain INR derivative contracts.
Points to Remember
- NDDCs involving INR to non-resident users allowed only for hedging
- FERR of 20% of INR equivalent notional amount required
- FERR applies where Authorised Dealer is purchasing foreign currency against INR
- FERR to be deposited as cash with RBI on a daily basis until contract termination
- Applicable to contracts undertaken after October 12, 2026
Why it matters
This change affects how banks offer foreign exchange derivatives to non-residents and requires maintaining additional cash reserves with RBI, impacting liquidity and hedging costs.
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