They are exploring if easier regulations on hedging of ” can come handy to cover exchange rate risks on payables and receivables of ‘contracted’ imports and exports .
Corporates enter into forwards, options, and other derivative contracts with banks to hedge. Until now, a company could buy or sell dollar forwards upto $100 mn without submitting any documents like invoice and agreement with overseas buyer/seller. On Saturday, Reserve Bank of India () slashed the limit to $5mn.
With this, the compliance load on banks — collecting and checking the authenticity of every trade contract and document above $5mn — will surge. A way out, some think, could be treating ‘contracted exposure’ as ‘anticipated exposure’. A corporate can buy or sell any amount of dollars forward against ‘anticipated exposure’ without presenting document. Here, documents are submitted later when forex is paid or received, failing which a bank won’t share gains from any exchange rate movement but make the corporate bear the loss if the rate moves adversely.
“Operationally, contracted exposure hedging will become quite cumbersome, with increased documentation and clerical load. The anticipated exposure window looks much cleaner and may be preferred by companies. While the cost from the newly-introduced (FERR) will still apply, at least operational hassles will be lower,” said Samir Lodha, MD of QuantArt, which advises companies on hedging strategies.
In its latest directive, RBI also said that for every derivative linked to forex purchase above $2m, banks will maintain cash reserve with RBI equivalent to 20% of the rupee notional amount. Banks understandably will recover cost from importers.
While RBI’s direct dollar supply to oil marketing companies may help stablise INR, some like Lodha think FEER on current account import won’t help. From our interactions with hundreds of large, medium and small importers, they are not speculating or driving USD-INR higher, he said. They are genuinely hedging to protect margins against falling rupee as many operate on thin margins, said Lodha.
According to Ritesh Bhusari, deputy treasury head at , the 20% risk reserve mirrors what China did in 2015, but history also carries a caution. “China’s reserve slowed the yuan’s fall but didn’t reverse it. Closer home, the rupee’s rally post March 2026 curbs faded within weeks,” he said.
On March 27, 2026, RBI capped banks’ net open position at $100mn, and few days later restricted non-deliverable forwards and banned rebooking of cancelled contracts before partly rolling them back in April. “The circular makes no distinction between contracted and anticipatory exposure as FERR would still apply. It’s up to banks whether they want to treat contracted exposure as anticipated exposure to reduce compliance burden. However, anticipated exposure hedging don’t add to speculative demand,” said Bhusari. Corporates with genuine hedges and no speculative position would not mind if their contracted exposure is considered as anticipated exposure.
With new curbs coming into force immediately, senior bankers held concall on Sunday with officials of industry body Forex Dealers Association of India (FEDAI). “The discussions were on implementation of new rules – how to maintain FEER reserve, should companies be asked to give documents upfront or on deal confirmation, what if it fails to and who bears cost if contract has to be cancelled. Also, how does a bank establish that a company isn’t using same underlier if it books a contract, cancels, and approaches a bank after a gap to book new contract. Some issues will be raised with RBI,” said another person.
Under the current circumstances, some banks may insist on documents even for deals below $5mn, said a banker.
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