The RBI has postponed the implementation date of its ETCD circular to May 3, 2024, from April 5. The regulatory framework for participating in ETCDs involving the Indian Rupee remains the same, with a limit of $100 million per exchange without providing evidence of underlying exposure.
The RBI’s decision to delay the implementation was made in response to feedback and concerns about participation in the ETCD market. The regulatory framework is based on FEMA provisions, requiring currency derivative contracts for hedging foreign exchange rate risks.
Participants must ensure compliance with the requirement of having underlying exposure, even though they can take positions up to $100 million per exchange without documentary evidence. The comprehensive review of the regulatory framework in 2020 led to the current Master Direction for all types of transactions, OTC, and exchange-traded, to enhance operational efficiency.
The recent circular reaffirms the regulatory framework for participation in ETCDs involving the Indian Rupee without any changes. Participants with a valid underlying contracted exposure can continue to enter into ETCDs up to the $100 million limit without having to produce documentary evidence. The RBI statement emphasizes the consistency of the regulatory framework over the years.
