SEBI has reduced the threshold for rupee-linked currency-derivatives positions that can be taken without proving an underlying exposure to $5 million, aligning exchange-traded rules with the Reserve Bank of India’s October measures.
Domestic clients and foreign portfolio investors may take long or short positions up to a single $5 million-equivalent notional limit outstanding at any point. The cap applies across all INR currency pairs combined and across all recognised stock exchanges.
Separate conditions for FPIs
FPIs must ensure aggregate short positions across exchanges and foreign-currency/rupee contracts do not exceed $5 million. Long positions above the threshold require underlying exposure to Indian debt or equity securities, including equity or debt mutual-fund units.
Domestic clients may exceed $5 million subject to RBI’s risk-management framework and the additional documentation rules introduced on 10 October.
Why the change matters
The earlier RBI threshold was $100 million. Reducing it to $5 million sharply narrows the space for exchange-traded currency positions without documented economic exposure.
The RBI also barred rebooking of cancelled INR derivative contracts while permitting rollover at maturity, and introduced additional undertakings intended to prevent the same exposure being hedged with multiple authorised dealers.
Exchanges and clearing corporations must update systems and rules, notify brokers and clearing members, and report implementation status to SEBI. The change increases documentation and compliance demands but may reduce leveraged or speculative activity disconnected from genuine currency risk.
Sources: SEBI circular, 5 November 2026 and RBI, 10 October 2026. This article is general information, not investment advice.
This article is journalism and commentary. It is not a recommendation to buy or sell any security, and it is not professional advice. Read the full disclaimer.
