RBI Withdraws April 1 Circular on Forex Risk Management and Interbank Dealings: Know More:

RBI Withdraws April 1 Circular on Forex Risk Management and Interbank Dealings: Know More The Reserve Bank of India (RBI) has issued Circular No. 07 on April 20, 2026, marking a significant and swift policy shift. By withdrawing instructions issued only twenty days prior, the central bank has moved to strictly regulate how Authorized Dealers (ADs) manage foreign exchange derivative contracts involving the Indian Rupee (INR), particularly when those trades occur between related entities. Key Takeaways By withdrawing the April 1st circular within just 20 days, the RBI is moving swiftly to close perceived loopholes in inter-bank and intra-group currency trading. The new restriction specifically targets "related party" transactions to prevent potential market distortions or risks arising from internal corporate hedging that involves the Indian Rupee. By tying the definition of "related parties" to formal accounting standards like Ind AS 24, the RBI has provided a clear, audit-ready benchmark for Authorized Dealers to identify restricted entities. To avoid market disruption, the RBI has allowed the "rollover and cancellation" of contracts already on the books, ensuring that existing hedges are not forcefully terminated.

Provision	Subject Matter	Earlier Position	Amended / New Position
Circular Status	April 01, 2026 Instructions	Instructions issued under Circular No. 03 were active for Authorized Dealers.	The RBI has officially scrapped the instructions issued on April 01, 2026, with immediate effect.
Contract Restrictions	INR Derivative Contracts	General hedging and trading protocols were followed under the Master Direction.	Authorized Dealers are now barred from entering into INR-involved FX derivative contracts with related parties.
Permitted Exceptions	Carve-outs for Related Parties	No specific restrictive limitations were placed on related party transactions in the previous circular.	Limited to Two Cases: 1. Cancellation/rollover of existing deals. 2. Back-to-back deals with non-related, non-resident users.
Statutory Authority	Regulatory Power	Issued under standard RBI administrative powers.	Issued under Sections 10(4), 11(1), and 11(2) of FEMA, 1999, making it a statutory mandat

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