RBI Eases Rupee NDF Curbs: What Changed from April 20
Why in the news
With the forex market calmer after a volatile March and banks having met the April 10 compliance deadline, the RBI judged arbitrage risk lower and softened some of its tight NDF restrictions.
| Feature | April 1-19 | From April 20 |
|---|---|---|
| Related-party deals | Fully banned | Allowed, but cancellation and rollover only |
| Back-to-back route | Prohibited | Permitted |
| Net open position | Capped at $100 million | Still capped at $100 million |
| New derivative trades with related parties | Barred | Still barred |
Key facts
- The easing helps banks manage existing risks while keeping speculation limited.
- The Governor called them temporary defensive steps taken during the West Asia conflict, not a lasting change of policy.
Background
- NDF: a forex derivative whose settlement is in a freely traded currency (mostly USD) and not in INR, letting offshore investors take a view on the rupee without owning it.
- Back-to-back route: a bank offsets a client trade with an identical opposite one, often with its offshore branch, leaving zero net exposure.
- Net open position (NOP): unhedged foreign currency exposure on a bank’s books; the cap stops large speculative positions.
- Arbitrage risk: traders exploit price gaps between onshore and offshore markets, which can drain forex reserves and pressure the rupee.
- Related-party transactions: deals between an Indian bank and its overseas branches or subsidiaries.
Exam angle
- Date of relaxation: April 20, 2026; original curbs: April 1.
- Constant limit: $100 million NOP.
- Related terms: NDF, NOP, arbitrage, forex firewall.