Reserve Bank of India (Standalone Primary Dealers) Amendment Directions, 2026 - Draft

भारतीय ररज़र्व बैंक RESERVE BANK OF INDIA _________________________ ______________________ www.rbi.org.in Draft for comments RBI/2025-26/ DOR.MRG.REC.No. //2025-26 XX 2026 Reserve Bank of India (Standalone Primary Dealers) Amendment Directions, 2026 Please refer to Annex I of the FMRD Master Direction No. 1/2016-17 - Master Direction - Risk Management and Inter-Bank Dealings and paragraphs 92 and 93 (section E.1.4) of the Reserve Bank of India (Standalone Primary Dealers) Directions, 2025, which inter alia specify the methodology for computation of Net Open Position and calculation of capital charge for foreign exchange risk. Upon a review and to ensure greater alignment with international standards and consistent implementation across Standalone Primary Dealers (SPDs), there is a felt need to amend these instructions. 2. Accordingly, in exercise of the powers conferred by Section 45JA, 45L and 45M of the Reserve Bank of India Act, 1934 and all other provisions / laws enabling the Reserve Bank to issue instructions in this regard, the Reserve Bank being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Amendment Directions hereinafter specified. 3. (i) These instructions shall be called the Reserve Bank of India (Standalone Primary Dealers) Amendment Directions, 2026. (ii) These Amendment Directions shall come into effect from April 1, 2027. 4. The Reserve Bank of India (Standalone Primary Dealers) Directions, 2025 are amended as provided below. i) In the extant instructions, paragraph 92 (section E.1.4) is hereby substituted by the following, namely: विवियमि विभाग,केंद्रीय कायाालय, 12 िीं और 13 िीं मंविल, केंद्रीय कायाालय भिि, शहीद भगत स ंह मागा,फोर्ा,म ंबई-400001 दरू भाष: 022-22601000 फैक् : 022-22705691 ई-मले : cgmicdor@rbi.org.in _____________________________________________________________________________________________________________________________________ Department of Regulation, Central Office, 12th and 13th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai- 400 001 Tel: 022- 2260 1000 Fax: 022-2270 5691 email: cgmicdor@rbi.org.in सहदं ी आ ाि ह ैइ का प्रयोग बढाइए‘E.1.4 Capital Charge for Foreign Exchange (FE) Position 92. An SPD shall compute capital charge for foreign exchange risk as per the following method. Scope of Application (1) An SPD shall meet the capital requirements for foreign exchange risk on a continuous basis, i.e., at the close of each business day. Exclusions from net open position (2) An SPD shall not apply foreign exchange risk capital requirement to any position that is deducted from the SPD’s regulatory capital, including a position that is hedging such a position. (3) An SPD shall not apply forex risk capital requirements to securities which are a) already matured and remain unpaid; or b) have been classified as a non- performing asset / investment. Such securities shall attract capital only for credit risk. Calculation of Net Open Position (4) For calculating the capital requirement for foreign exchange risk, an SPD shall include all assets, liabilities, and off-balance sheet positions, within the ‘Scope of Application’ above, in foreign currencies, including gold. Note: In terms of paragraph 119(4), an SPD is not allowed to undertake trading / broking in gold. (5) The Net Open Position shall be calculated as under: (i) Measure the exposure in a single currency as set out in paragraphs 92(6) to 92(10). (ii) Measure the risks inherent in an SPD’s mix of long and short positions in different currencies as set out in paragraphs 92(11) to 92(14). Measuring the exposure in a single currency (6) An SPD’s net open position in each currency shall be calculated by summing: (i) the net spot position (i.e., all asset items less all liability items, including accrued interest, denominated in the currency in question); 2(ii) the net forward position (i.e., all amounts to be received less all amounts to be paid as indicated in paragraph 92(7)); (iii) net future income / expenses not yet accrued / due but where the amounts are certain and have been fully hedged by the SPD, at its discretion; (iv) any other item representing a profit or loss in foreign currencies; and (v) the net delta-based equivalent of the total book of foreign currency options. (7) The net forward position includes: (i) tom and spot transactions which are not yet settled; (ii) forward and futures transactions; and (iii) principal on currency swaps and any other derivative transactions not included in the spot position. (8) Positions in composite currencies need to be separately maintained but, for measuring an SPD’s net open position, may be either treated as a currency in their own right or split into their component parts on a consistent basis. Positions in gold (spot plus forward) should be first expressed in terms of the standard unit of measurement (tonnes / kilos / ounces, etc.), with the net position being valued at current spot rates. (9) Interest, other income and expenses should be treated as follows: Interest accrued (i.e., earned but not yet received) and accrued expenses should be included as a spot position. Unearned but expected future interest and anticipated expenses may be excluded unless the amounts are certain and the SPD has taken the opportunity to hedge them. If an SPD includes future income / expenses it should do so on a consistent basis, and it would not be permitted to select only those expected future flows which reduces its position. (10) Measurement of derivative positions: An SPD shall use the net present values of derivative positions, including forward exchange contracts, discounted using current interest rates and valued at current spot rates. An SPD may select the yield curve for the purpose of present value adjustments, provided the same is selected in a manner which is representative of the funding cost. An SPD shall have an internal policy approved by its Asset Liability 3Committee (ALCO) regarding the yield curve / (s) to be used and apply it on a consistent basis. Measuring the foreign exchange risk in a portfolio of foreign currency positions and gold (11) For measuring the foreign exchange risk in a portfolio of foreign currency positions and gold, an SPD shall use a shorthand method which treats all currencies equally. (12) Under the shorthand method, the nominal amount (or net present value) of the net position in each foreign currency and in gold is converted at spot rates into the reporting currency. The overall net open position is measured by aggregating: (i) the sum of the net short positions or the sum of the net long positions, whichever is greater; plus (ii) the net position (short or long) in gold, regardless of sign. Explanation: The spot rates to be used for this purpose shall be determined based on the extant FEDAI guidelines. (13) Transactions undertaken by an SPD till the end of business day shall be included for calculation of Net Open Position. The transactions undertaken after the end of business day may be taken into the positions for the next day. For this purpose, an SPD may define its own end of business day timings but the same shall be determined as per a duly approved internal policy and followed on a consistent basis. (14) Under the Standardised approach, the capital requirement for foreign exchange positions, including gold, shall be 15 per cent of the overall net open position computed using the shorthand method. This capital requirement is in addition to the capital requirement for credit risk, interest rate risk or any other risks on the on-balance sheet and off-balance sheet items pertaining to foreign exchange and gold transactions. 4Illustration: See example in Table below. Table: Example of the shorthand measure of foreign exchange risk JPY EUR GBP CAD USD Gold Net position per currency +50 +100 +150 -20 -180 -35 Net open position +300 -200 35 The capital requirement, under the standardised approach, will be 15 per cent of the overall net open position. Thus, the capital requirement would be 15 per cent of the higher of either the net long currency positions or the net short currency positions (i.e., 300) and of the net position in gold (35) = 335 x 15 per cent = 50.25.’ ii) Paragraph 93 of the extant instructions stands deleted. (Sunil T S Nair) Chief General Manager 5