# RBI cuts forex derivatives documentation threshold to $5 million Author: KriptoMeta Editorial Team Language: English Published: 2026-10-10T11:33:41+03:00 Updated: 2026-10-10T11:33:41+03:00 ![Conceptual view of a bank currency-processing machine holding rupee and dollar notes in separate compartments](https://kriptometa.com/uploads/rbi-doviz-turevlerinde-belge-esigini-milyon-dolara-indirdi-2420fbc70749_article.webp) ## Key takeaways - The threshold for hedging contracted exposure without establishing the underlying risk fell from $100 million to $5 million. - Authorised Dealers must hold a 20% cash reserve against specified foreign-currency purchase contracts above $2 million. - A special window will meet the daily dollar needs of Indian Oil, Hindustan Petroleum and Bharat Petroleum from October 12. The new rupee derivatives rules tighten documentation and restrict rebooking cancelled contracts. A separate dollar window for three oil companies opens October 12. The Reserve Bank of India cut the documentation threshold for rupee-linked foreign exchange derivatives from $100 million to $5 million in circulars issued on October 10. It also introduced a cash reserve requirement for some transactions. In its [announcement of the measures](https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=63783), the RBI said it aimed to maintain orderly functioning of the foreign exchange market. Three days earlier, the RBI had [raised its repo rate to 5.50% at the October 7 policy meeting](https://kriptometa.com/en/india-rbi-rate-hike-monetary-tightening). The new circulars govern the transactions companies and dealers use to hedge currency risk. ## Documentation threshold falls to $5 million Under [Circular No. 25](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=13737&Mode=0), the threshold for hedging contracted exposure without having to establish the existence of the underlying risk falls from $100 million to $5 million equivalent. The limit covers outstanding positions across all Authorised Dealers, rather than giving users a separate allowance at each dealer. The corresponding threshold for exchange-traded currency derivatives involving the rupee also falls to $5 million. Long or short positions across all relevant currency pairs and recognised exchanges are counted together. The change narrows a documentation concession; it is not a blanket $5 million cap on all foreign exchange trading. Dealers must obtain an undertaking that the same underlying exposure has not also been hedged with another dealer. If users split a hedge across several dealers, the undertaking must specify amounts already booked elsewhere. Dealers must retain documents needed to verify compliance for at least two years. Rupee-linked derivative contracts cancelled after the directions were issued cannot be rebooked. The restriction covers both deliverable and non-deliverable contracts. Rolling over a contract at maturity remains permitted under the existing rules. The circular took effect immediately. ## Which contracts face the 20% reserve? [Circular No. 26](https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=13738&Mode=0) introduces a Foreign Exchange Risk Reserve, or FERR, for rupee-linked derivatives with a notional value exceeding $2 million equivalent, where the user buys foreign currency against rupees to hedge current account transactions. The Authorised Dealer, rather than the customer, must maintain the reserve with the RBI. The reserve equals 20% of each contract’s notional value expressed in rupees. It must be held in cash on a daily basis until the contract terminates. Dealers must report the amount held every day through the central bank’s CIMS system. **The two dollar thresholds serve different purposes.** $5 million is the limit for the documentation concession; $2 million is the threshold above which specified contracts incur the reserve requirement. The reserve is not described as a 20% tax deducted from the contract value. The reserve applies to contracts entered into after the circular was issued. Splitting transactions across one or more dealers to avoid the requirement will be treated as a breach of the directions. ## Dollar window for oil companies opens October 12 In a [separate announcement issued the same day](https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=63784), the RBI said it would open a special window to meet the entire daily dollar requirements of three public sector oil marketing companies. Dollar sales to Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation will take place through designated banks. The facility starts on Monday, October 12, and will remain available until further notice. The announcement does not specify a daily sales amount or an overall ceiling.