The Securities and Exchange Board of India (SEBI) has revised currency derivatives trading limits, allowing domestic investors and foreign portfolio investors (FPIs) to trade up to USD 5 million in rupee-linked contracts without showing proof of underlying foreign currency exposure, ANI reported on Thursday, November 5. In its circular, the market regulator said domestic clients and FPIs can take long or short positions in currency derivatives involving the Indian rupee (INR) within the prescribed limit across all recognised stock exchanges.

Source: ANI via Daily Prabhat

"Domestic clients and Foreign Portfolio Investors (FPIs) may take long or short positions in currency derivatives contracts involving INR, without having to establish the existence of underlying exposure, up to a single limit of USD 5 million equivalent of notional value (outstanding at any point), across all currency pairs involving INR, put together, and combined across all recognised stock exchanges," the circular said, as quoted by ANI.

Source: ANI via Daily Prabhat

USD 5 millionSingle combined no-underlying limit, outstanding at any point
USD 100 millionPrevious RBI no-underlying threshold, cut on October 10
All INR pairsLimit applies across every rupee currency pair put together
All exchangesLimit is combined across all recognised stock exchanges

The revision brings the exchange-traded provisions in line with the Reserve Bank of India's revised thresholds announced on October 10, replacing the relevant threshold limits under SEBI's Master Circular for Stock Exchanges and Clearing Corporations dated December 30, 2024, Tech Word News reported. The RBI had earlier fixed the exposure limit for rupee-linked currency derivatives at USD 100 million, so the single aggregate limit replaces what were previously separate contract-wise treatments.

Source: Tech Word News

For FPIs, SEBI specified that their total short positions across all stock exchanges and foreign currency-rupee contracts must not exceed USD 5 million, while FPIs seeking to take long positions exceeding USD 5 million must have underlying exposure in Indian debt or equity securities, including investments in equity or debt mutual funds, ANI reported. For domestic investors, positions exceeding USD 5 million will be permitted subject to the conditions prescribed under the RBI's Master Direction on Risk Management and Inter-Bank Dealings, as amended, and its circular dated October 10, 2026.

Source: ANI via Daily Prabhat

What happens next: stock exchanges and clearing corporations are to put the necessary systems in place and amend their rules to give effect to the revised provisions, the reports said. The change is part of the broader October revision of rules governing foreign exchange derivatives involving the rupee, covering hedging of contracted exposures and related documentation.

Source: Tech Word News