RBI brings back its 2011 ban on rebooking cancelled hedges

Economy No. 60 11 October 2026 · 1 min read

In a circular dated October 10, 2026, the RBI banned companies from cancelling a rupee hedge and booking it again later. Companies can still extend an existing hedge when it matures. The RBI also cut the limit for hedging without showing proof of an actual foreign currency exposure from $100 million to $5 million. This limit applies to currency derivatives traded on exchanges too.

What does cancel-and-rebook mean? Imagine an importer books a hedge to lock in the cost of buying dollars in the future. If the exchange rate moves in their favour, they can cancel the hedge, take the gain and book a new one. The RBI has now banned this practice. However, companies can still extend an existing hedge when it reaches maturity.

The RBI had withdrawn the same facility on December 15, 2011, when the rupee was at ₹53.55 per dollar. Today, it stands at ₹96.31.

The RBI has also tightened the rules for hedging without paperwork. Earlier, companies could hedge up to $100 million without showing banks documents proving the underlying foreign currency payment or receipt. That limit is now just $5 million. For larger hedges, companies must show proof of the actual exposure they are trying to protect themselves against. The same limit applies to currency derivatives traded on exchanges.

Step line chart of how much a company can hedge with a bank without showing the exposure behind it: $10 million from the directions of 7 April 2020, $100 million from the directions of 5 January 2024, and $5 million from the circular of 10 October 2026.

Table of the RBI's measures of 15 December 2011 and 10 October 2026 side by side: rebooking a cancelled hedge banned both times; the rupee at ₹53.55 a dollar then and ₹96.31 now; importers' no-contract hedging limit cut to 25% of turnover then, the no-paperwork window cut to $5 million from $100 million now.

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