**Executive Summary**
The Reserve Bank of India (RBI) issues amendment directions for Standalone Primary Dealers (SPDs) effective April 1, 2027, to align with international standards and ensure consistent implementation. These directions amend the Reserve Bank of India (Standalone Primary Dealers) Directions, 2025, specifically regarding the computation of Net Open Position and calculation of capital charge for foreign exchange risk. The document specifies changes to paragraph 92 (section E.1.4) of the extant instructions and deletes paragraph 93.
**Key Points / Main Content**
* **Amendment Directions:**
* These are called the Reserve Bank of India (Standalone Primary Dealers) Amendment Directions, 2026.
* They come into effect on April 1, 2027.
* **Amendments to Existing Directions:**
* Paragraph 92 (section E.1.4) of the Reserve Bank of India (Standalone Primary Dealers) Directions, 2025 is substituted with new instructions.
* Paragraph 93 of the extant instructions stands deleted.
* **Capital Charge for Foreign Exchange (FE) Position (E.1.4):**
* An SPD shall compute capital charge for foreign exchange risk as per the method provided.
* An SPD shall meet the capital requirements for foreign exchange risk on a continuous basis (i.e., at the close of each business day).
* **Scope of Application:**
* An SPD shall not apply foreign exchange risk capital requirement to any position that is deducted from the SPD's regulatory capital.
* An SPD shall not apply forex risk capital requirements to securities which are already matured and remain unpaid or have been classified as a non-performing asset / investment. Such securities shall attract capital only for credit risk.
* **Calculation of Net Open Position:**
* 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.
* An SPD is not allowed to undertake trading / broking in gold.
* The Net Open Position shall be calculated by:
* Measuring the exposure in a single currency as set out in paragraphs 92(6) to 92(10).
* Measuring 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**
* An SPD's net open position in each currency shall be calculated by summing:
* the net spot position (i.e., all asset items less all liability items, including accrued interest, denominated in the currency in question);
* the net forward position (i.e., all amounts to be received less all amounts to be paid as indicated in paragraph 92(7));
* 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;
* any other item representing a profit or loss in foreign currencies; and
* the net delta-based equivalent of the total book of foreign currency options.
* **Net Forward Position**
* includes:
* tom and spot transactions which are not yet settled;
* forward and futures transactions; and
* principal on currency swaps and any other derivative transactions not included in the spot position.
* **Composite Currencies and Gold**
* 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.
* **Interest, Other Income and Expenses**
* 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.
* **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 Committee (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**
* 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.
* 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:
* the sum of the net short positions or the sum of the net long positions, whichever is greater; plus
* the net position (short or long) in gold, regardless of sign.
* Spot rates to be used for this purpose shall be determined based on the extant FEDAI guidelines.
* **Calculation of Net Open Position**
* 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.
* **Standardised approach for capital requirement**
* 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.
**Impact Analysis**
**Standalone Primary Dealers (SPDs)**
* **Impact:** SPDs are required to adhere to the new guidelines for computing Net Open Position and calculating capital charges for foreign exchange risk. The change in methodology affects how they manage and report their foreign exchange exposures.
* **Action Required:** SPDs need to update their internal policies, risk management systems, and reporting mechanisms to comply with the revised directions by the effective date of April 1, 2027. They must also establish an internal policy approved by its Asset Liability Committee (ALCO) regarding the yield curve.
**Reserve Bank of India (RBI)**
* **Impact:** The RBI is responsible for supervising SPDs and ensuring compliance with these amendment directions.
* **Action Required:** The RBI needs to monitor SPDs' implementation of the new guidelines and assess their impact on the stability of the financial system. They also need to ensure that the data for spot rates is provided based on the FEDAI guidelines.
Key Entities Referenced
Reserve Bank of India (Standalone Primary Dealers) Amendment Directions, 2026: The primary subject of the document, outlining amended directions for Standalone Primary Dealers.
Reserve Bank of India (Standalone Primary Dealers) Directions, 2025: The original directions that are being amended by the current document.
FMRD Master Direction No. 1/2016-17 - Master Direction - Risk Management and Inter-Bank Dealings: Referenced master direction relevant to risk management and inter-bank dealings, providing context to the amendments.
Reserve Bank of India Act, 1934: The act that provides the legal basis for the Reserve Bank's power to issue instructions related to Standalone Primary Dealers.
Standalone Primary Dealers (SPDs): Entities to which the directions apply; these directions specify methodologies for computation of Net Open Position and calculation of capital charge for foreign exchange risk.
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