RBI permits banks to offer non-deliverable forex derivatives to resident users

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the Reserve Bank of India (RBI) Banks with IFSC Banking Units (IBUs) were allowed to offer Non-Deliverable Derivatives Contracts (NDCC) incorporating the Indian Rupee to users residing in the onshore market.

According to RBI, the move seeks to develop the onshore INR-NDDC market and provide residents with flexibility to efficiently design their own hedging programs.

Also read: Highlights RBI Monetary Policy Statement

“This measure will deepen the forex market in India and will provide enhanced flexibility to residents in meeting their hedging requirements,” Reserve Bank of India Governor Shaktikanta Das said in his policy result statement.

From 1st June 2020 onwards, banks operating IBUs are allowed to transact in rupees Non-Deliverable Foreign Currency Derivative Contracts (NDDCs) with non-residents and with each other.

“Banks will have the flexibility to settle their transactions with NDDC with non-residents and with each other in foreign currency or in Indian rupees, while transactions with residents will be compulsorily settled in Indian rupees,” the Reserve Bank of India said.

The central bank will separately issue relevant guidance on the same.