What changed (A.P. (DIR Series) Circular No. 26, 10 October 2026)
- 20% Foreign Exchange Risk Reserve: banks must keep 20% of the notional value, in cash with RBI, on INR contracts above USD 2 million equivalent where the user is buying foreign currency to hedge current-account exposures. Splitting contracts across banks to stay under the threshold is treated as a violation.
- Hedging without proving the underlying exposure is cut from USD 100 million to USD 5 million.
- Cancelled contracts can’t be rebooked; rollovers at maturity are still allowed.
Who feels it
- Importers and companies paying large dollar bills — the reserve ties up bank capital, which is likely to show up in forward pricing.
- Startups and GCCs with dollar costs or revenues — revisit your treasury policy and keep documentary evidence of the underlying exposure ready.
- Exporters selling dollars are not the target of the reserve (it applies where foreign currency is bought).
What to do
- Map your current-account exposures and existing forward contracts.
- Talk to your bank about pricing on contracts above USD 2 million.
- Re-run cash forecasts with the new hedging cost — see the runway calculator.
Need a treasury and FX policy? That’s part of our Virtual CFO work.
Frequently asked questions
What is RBI's foreign exchange risk reserve?
Under RBI's circular of 10 October 2026, banks must hold 20% of the notional value in cash with RBI on INR forex derivative contracts above USD 2 million where the user buys foreign currency to hedge current-account exposure.
How much can a company hedge without showing underlying exposure?
Up to USD 5 million, reduced from USD 100 million by RBI's October 2026 changes.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.