The Reserve Bank of India is taking a major step to shed light on hidden financial flows. On Monday, it issued draft norms targeting offshore rupee derivative transactions. This move aims to bring greater transparency to the foreign exchange market.
Currently, a significant number of these offshore trades occur in the shadows. They are not reported to any central repository in India. This lack of visibility creates an information gap for other market participants.
The RBI has been steadily working to enhance transparency for years. All over-the-counter derivative transactions are already reported to a domestic trade repository. However, the offshore segment remained a blind spot.
This new draft directive specifically targets Authorised Dealer Category-I banks. They will now be required to report all foreign exchange derivative transactions involving the rupee. This applies to trades undertaken by their related parties anywhere in the world.
The goal is clear: to enable better pricing decisions across the board. When everyone has access to the same market data, pricing becomes more efficient. This levels the playing field for all participants.
This is not the RBI’s first action in this direction. In 2022, standalone primary dealers were brought under a similar reporting rule. Then, in 2025, banks faced reporting requirements for rupee interest rate derivatives.
The latest move continues this process of gradual enhancement. It represents the next logical step in the central bank’s transparency drive. The rupee derivative market is now under a more comprehensive microscope.
According to the draft, banks must report all relevant details of covered transactions. This includes critical data like the notional value and the counterparty’s name. Maturity dates and currency specifications are also part of the required information.
The RBI believes this data is crucial for meaningful market insight. With full visibility, participants can make more informed decisions. Hidden offshore trades will no longer distort the market picture.
The central bank is now seeking feedback on its proposal. It has invited comments from stakeholders and interested parties. The deadline for submitting these comments is March 9.
This regulatory push underscores a global trend toward financial transparency. Markets function best when information is freely available. The RBI is ensuring the rupee market aligns with this principle.
The move is expected to have a significant impact on trading strategies. Market-makers will need to adjust to the new reporting reality. The era of opaque offshore rupee trades is coming to an end.
Ultimately, a more transparent market benefits everyone involved. It reduces uncertainty and builds stronger confidence in the financial system. The RBI’s directive is a proactive step toward that stable future.