RBI Opens Up Rupee NDF Trading to Standalone Primary Dealers

As per the news reports, in a significant regulatory change, the Reserve Bank of India (RBI) announced that standalone primary dealers can now offer non-deliverable derivative contracts (NDDCs) linked to the rupee. The measure broadens participation in the offshore derivatives market, which was earlier limited to AD Cat-I banks and IFSC Banking Units.

Background and New Provisions

Previously, only Authorised Dealer Category-I (AD Cat-I) banks in India, their International Financial Services Centre (IFSC) units, and overseas banks could trade in rupee NDDCs. With the latest amendment to the Master Direction on Risk Management and Inter-Bank Dealings, SPDs classified as AD Cat-III entities have been brought into the fold.

As per the news reports, the RBI notification stated: “Authorised Dealer Category-I (AD Cat-I) banks in India operating an International Financial Services Centre (IFSC) Banking Unit (IBU) have been permitted under the Master Direction to transact in non-deliverable derivative contracts (NDDCs) involving the rupee with users, other AD Cat-I banks operating an IBU and banks overseas.

On a review, it has been decided that standalone primary dealers (SPDs) authorised as Authorised Dealer Category–III (AD Cat-III) shall also be eligible to transact in NDDCs involving the rupee.”

Implications for Market Participants

The inclusion of SPDs is expected to deepen the rupee derivatives market, improve access for resident and non-resident participants, and provide additional hedging tools. By widening participation, RBI aims to strengthen liquidity and align India’s derivative market structure with global practices.

Read More: RBI Governor Urges CCIL to Expand Infrastructure for Currency Trades Beyond USD-INR!

Conclusion

With SPDs now authorised to deal in rupee NDDCs, the RBI has taken another step toward expanding market access and strengthening India’s currency risk management ecosystem. The move is expected to provide more flexibility to investors while enhancing the depth of the rupee derivatives market.

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