Lenders warn Reserve Bank of India on liquidity issues in rupee forwards market

lenders: Indian lenders refer to commercial banks and authorised dealers active in foreign exchange and treasury operations. These institutions recently informed the Reserve Bank of India that its new restrictions on foreign-exchange derivatives are drying up liquidity in the rupee forwards market. The feedback highlights practical challenges in hedging and market-making under the updated rules. Reserve Bank of India: The Reserve Bank of India is the central bank responsible for India's monetary policy, banking regulation, and foreign exchange market oversight. In mid-October 2026 it announced regulatory measures on rupee-linked foreign exchange derivatives aimed at ensuring orderly market functioning amid currency pressures. Lenders have since flagged to the central bank that these restrictions are reducing liquidity in the currency forwards market. Regulation: The Reserve Bank of India has implemented several measures on rupee derivatives to promote market discipline and limit speculative activity. Market Feedback: Indian lenders have directly communicated to the central bank that recent restrictions on foreign-exchange derivatives are leading to reduced liquidity in the currency forwards market.