RBI’s 2026 Amendments on Foreign Exchange Risk Capital for Standalone Primary Dealers
The Reserve Bank of India has overhauled the regulatory framework governing the computation of Net Open Position (NOP) and capital charge for foreign exchange risk for Standalone Primary Dealers (SPDs). Through the Reserve Bank of India (Standalone Primary Dealers) Second Amendment Directions, 2026, the central bank has aligned the domestic regime more closely with international best practices and ensured uniform implementation across all SPDs.
These revised norms will come into force from April 1, 2027, and will replace the existing framework contained in paragraph 92 and delete paragraph 93 of the Reserve Bank of India (Standalone Primary Dealers) Directions, 2025. The amendments operate under the powers granted to RBI under Sections 45JA, 45L and 45M of the Reserve Bank of India Act, 1934 and related enabling provisions.
Regulatory Background and Objective
The new Directions refer back to:
- Annex I of the FMRD Master Direction – Risk Management and Inter-Bank Dealings (Master Direction No. 1/2016-17 dated July 5, 2016); and
- Paragraphs 92 and 93 (section E.1.4) of the Reserve Bank of India (Standalone Primary Dealers) Directions, 2025,
which collectively laid down the earlier methodology for:
- computing Net Open Position; and
- determining the capital charge on foreign exchange risk.
Upon review, RBI identified a need to refine these instructions:
- to better reflect global regulatory standards, and
- to ensure consistency in how different SPDs measure and capitalise their foreign exchange exposures.
Accordingly, RBI issued the Reserve Bank of India (Standalone Primary Dealers) Second Amendment Directions, 2026 under notification RBI/2026-27/162 DOR.MRG.REC.No.148/03-10-119/2026-27 dated June 24, 2026.
Effective Date and Nature of Amendments
Commencement
These Directions are formally titled:
“Reserve Bank of India (Standalone Primary Dealers) Second Amendment Directions, 2026”.The revised norms will take effect on April 1, 2027. SPDs must have systems, processes, and policies ready to comply from this date.
Amendments to 2025 Directions
The Reserve Bank of India (Standalone Primary Dealers) Directions, 2025 stand modified as follows:
- Paragraph 92 is fully substituted with a new, expanded clause titled “E.1.4 Capital Charge for Foreign Exchange (FE) Position”; and
- Paragraph 93 is removed entirely.
The discussion below restates the operative content of the new paragraph 92, which sets out the comprehensive framework for capital charge on foreign exchange risk.
Continuous Capital Requirement for Foreign Exchange Risk
Daily Compliance Obligation
Under the revised framework, every SPD is required to:
- compute and maintain capital for foreign exchange risk on a continuous basis, specifically:
- as at the close of each business day.
This implies:
- NOP and capital charge calculations are not merely periodic;
- compliance must be demonstrated at the end of every trading day, reflecting all eligible on-balance sheet and off-balance sheet foreign currency positions.
Positions Excluded from Foreign Exchange Capital Charge
The Directions clarify certain exclusions where foreign exchange capital requirements shall not apply.
Regulatory Capital Deductions
An SPD is not required to calculate or hold capital for foreign exchange risk in respect of:
- any position that is already deducted from the SPD’s regulatory capital; and
- any hedging position that is specifically used to hedge such a deducted item.
These items are effectively taken out of the risk-capital framework since they do not impact the regulatory capital base in the usual manner.
Matured or Non-Performing Securities
The foreign exchange capital requirement does not apply to:
- Securities that have already matured but remain unpaid; and
- Securities that have been classified as a non-performing asset or non-performing investment.
For these instruments: