The Reserve Bank of India has issued final amendment directions on Net Open Position (NOP) calculations that will come into effect on April 1, 2027. According to reports from Business Standard and The Economic Times, the revised framework eliminates the requirement for banks to separately calculate onshore and offshore foreign-exchange positions while aligning foreign-exchange risk calculations with Basel standards. The central bank issued these final directions after examining feedback received on draft norms released in January 2026. The framework aligns the calculation of foreign-exchange risk with Basel standards and clarifies the treatment of overseas operations, structural foreign-currency investments and derivative exposures. As per Kotak Securities analysis, this major overhaul aims to curb speculation, reduce onshore-offshore arbitrage, and stabilize the rupee.
Under the revised framework, banks can exclude specified structural foreign-exchange positions from NOP calculations at both standalone and consolidated levels. As reported by The Economic Times, the key clarification allows banks to exclude eligible structural foreign currency investments from NOP calculations on both a standalone and consolidated basis. These exclusions include capital investments and accumulated or unremitted earnings in overseas subsidiaries, branches, joint ventures and associates, provided they are non-dealing positions. The regulator has also allowed lenders to apply such exemptions on a case-by-case basis, removing the draft requirement for prior regulatory approval. The final directions clarify that all open positions from onshore and offshore operations will be captured under a single NOP calculation, eliminating the need for separate computation of offshore positions. Market participants indicate that these exemptions will create room for additional positions and improve trading capacity for banks. According to Kotak Securities, these changes will boost the rupee's stability by reducing speculative activities and arbitrage opportunities.
The RBI has accepted industry feedback on derivative position treatment and banks shall use current spot rates, without present-value adjustment, for measuring derivative exposures. According to Business Standard, the central bank has also replaced the requirement to use Foreign Exchange Dealers' Association of India (FEDAI) guidelines for spot rates under the shorthand method, allowing banks to use financial benchmarks administered by authorised benchmark administrators instead.
The revised framework modifies the shorthand method for calculating NOP in line with Basel standards by treating gold positions separately from foreign-currency positions. As reported by Business Standard, banks will calculate the net position in gold independently and add it to the larger of aggregate net long or net short foreign-currency positions for determining overall NOP and the associated capital charge. This modification ensures compliance with international banking standards.
The RBI has retained the requirement for banks and all-India financial institutions to maintain a capital charge for foreign-exchange risk at both standalone and consolidated levels. According to The Economic Times, the revised rules do away with the separate calculation of onshore and offshore net open positions (NOP) and allow banks to include accumulated surpluses from overseas operations in NOP calculations. While some regulated entities had sought relaxation from consolidated-level capital requirements citing operational challenges, the central bank permitted the use of internal limits in individual currencies as a proxy for actual positions in certain marginal overseas operations for consolidated NOP calculations. The framework also clarifies that all open positions from onshore and offshore operations will be captured under a single NOP calculation, eliminating the need for separate computation of offshore positions. Forex risk capital will be based on actual net open positions, with the revised rules requiring banks to maintain capital charges against actual NOP calculations. As per Kotak Securities, these comprehensive changes represent a major overhaul of India's forex risk capital framework that will significantly impact banks' trading strategies and the overall stability of the Indian rupee.
