The Reserve Bank of India has withdrawn its April 1 circular that had barred banks and other authorised forex dealers from offering non-deliverable forward (NDF) contracts to clients. According to reports from The Economic Times, the RBI has now eased parts of its forex rules for banks, allowing certain related-party hedging transactions to continue and clarifying that they will not be treated as speculative trades. The central bank has also allowed banks to retain existing positions within the $100 million cap until maturity, or modify them if required, removing the need for premature unwinding. This reversal provides banks with increased operational flexibility and fosters a more fluid trading environment. As per the RBI, "On a review, it has now been decided to withdraw the instructions issued vide A.P. (DIR Series) Circular No. 03 dated April 01."
The RBI has rolled back the ban on banks and their clients from rebooking any foreign exchange derivative contract cancelled after April 1, according to The Economic Times. The central bank has now allowed banks to offer NDF contracts to their clients within the overall $100 million open position limit. Forex watchers noted that "This is a clarification from RBI gives banks some breathing space because it means they can offer NDF contracts to their clients within the overall $100 million open position limit." The RBI has also allowed banks to cancel or rollover existing contracts with related parties and permitted transactions with non-related non-resident users on a back-to-back basis provided it is within the limits. As reported by Kotak Securities, "These clarifications though will not have much impact on the dollar rupee but are important from providing banks some room to trade."
In a significant move to enhance digital fraud prevention, the Reserve Bank of India has brought cross border recurring electronic payments using cards, pre-paid instruments and UPI under its E-mandate (electronic mandate) rules. According to The Economic Times, financial institutions have to provide a customer with a facility to opt-out of any particular transaction or the e-mandate, validated through a additional factor authentication (AFA). The customer has been given the choice to either set an e-mandate for pre-specified fixed amount or for a variable amount subject to the overall cap fixed by the RBI. "Any modification in, or withdrawal of, an existing e-mandate shall require AFA validation by the issuer," RBI stated. The central bank has set a ₹15,000 per transaction limit for recurring electronic mandate transactions and a ₹1 lakh limit for recurring payment of credit card, insurance and mutual funds without any AFA. Banks cannot levy charges on customers availing the e-mandate facility for recurring transactions.
RBI Governor Sanjay Malhotra has emphasized that the central bank is closely monitoring short-term fluctuations, including net Foreign Direct Investment (FDI) outflows and exchange rate movements, as reported by The Hindu BusinessLine. Speaking at a round-table hosted by Consulate General of India in New York on April 22, 2026, Malhotra stated that "Short-term fluctuations, including net Foreign Direct Investment (FDI) outflows and exchange rate movements, are cyclical in nature and are being closely monitored." The Governor noted that "In uncertain times such as this, it is important to be agile and nimble, maintaining a broad policy stance, and avoid making firm commitments of the future path of policy." He highlighted that "Our broad approach has been to be even more data dependent and to continuously reassess the balance of risks. We are therefore in wait and watch mode now."
The regulatory reversal has provided "some semblance of normalcy in the market because banks were unfairly punished for executing genuine transactions," as noted by a senior bank treasury official to The Economic Times. However, "Volumes both domestically and overseas continue to remain thin because banks are wary of taking positions due to the frequent changes in regulations by RBI which is not a healthy sign from a markets perspective." The enhanced flexibility allows banks to "offer NDF contracts to their clients within the overall $100 million open position limit" while maintaining existing positions until maturity. This development represents a significant shift from the previous restrictions that had created operational challenges for forex dealers and their corporate clients. The current market conditions reflect the "wait-and-watch mode" approach adopted by the RBI, with the central bank maintaining a neutral stance for the last few policy cycles to preserve flexibility amid evolving inflation-growth dynamics.
