The Reserve Bank of India (RBI) on Monday asked banks to report offshore rupee-linked derivative contracts executed by their group entities.The directive, which comes into force from July 2027 in a phased manner, signals a decisive shift in the regulator’s approach—from monitoring domestic transactions to tracking the full global footprint of rupee trades.
The RBI said that the move aims to improve transparency and enable efficient price discovery in the forex market.
“To address the operational concerns, adequate flexibility including staggered implementation of the requirements and exclusion of trades below a specified threshold have been provided,” it said.
The RBI mandate comes despite banks pointing out operational challenges, including minimal visibility or control over offshore related parties’ data and trading as Indian branches of foreign banks are distinct legal entities. Responding to that, the RBI said this concern is already addressed as it allows offshore related parties of banks to report covered transactions directly.
Providing some operational flexibility, the regulator said that banks are not required to report transactions undertaken in terms of the back-to-back arrangement. It also exempts banks from reporting contracts with notional value under $1 million.
The RBI has also mandated reporting such contracts undertaken by the parent bank, including the branches of the parent.
Expert said the move is an attempt to redraw the balance of influence between onshore and offshore currency markets, where pricing of the rupee is often shaped outside India’s regulatory perimeter. By requiring granular disclosures—covering notional value, counterparties, maturities and currency composition—the RBI is effectively building a comprehensive data architecture to track how and where rupee risk is being created and transferred.
This matters because a significant portion of rupee derivatives activity sits in offshore centres, particularly through non-deliverable forwards (NDFs) and internal trades within global banking groups. These transactions, while linked to the rupee, have historically remained outside India’s reporting framework. The new rules aim to close that gap. Even if trades are executed abroad, they will now have to be reported—either by the Indian entity or directly by offshore related parties.
The changes will roll out in phases. Banks must report FX derivative transactions covering 70% of notional value by July 2027, 80% by January 2028, and 100% by July 2028, the RBI said.
