India to Pursue Mandatory Disclosure of Offshore Rupee Trades Amid Resistance

RBI Pushes Ahead with Proposal to Mandate Reporting of Offshore Rupee Derivatives Trades

The Reserve Bank of India (RBI) plans to move forward with a proposal that requires banks to report offshore rupee derivative trades, despite objections from lenders. The move is aimed at increasing transparency in a market that has put pressure on the currency.

In February, the RBI proposed that banks report rupee foreign exchange derivative transactions undertaken globally by their related parties. The central bank argued that this would support more efficient price discovery. The RBI wants lenders to start sharing data on at least 70% of such derivative transactions, starting from February 2027.

Domestic banks are already required to report all derivative transactions, including those by their overseas offices. In contrast, foreign lenders currently only report derivatives traded by their India units, not those executed by offshore ones. The RBI proposal is aimed at leveling the playing field between Indian and foreign banks.

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The large offshore forward market has a significant impact on the rupee's exchange rate, an influence that has increased since the RBI opened the market to Indian banks and companies. According to data from the Bank for International Settlements, cross-border trades involving the rupee totaled about $60 billion in April 2025, roughly two-thirds of total turnover in the outright forward market.

India's central bank recently clamped down on trades that sought to benefit from the pricing difference between the NDF and local forwards market. The size of these positions was estimated to be around $40 billion. Such trades by banks were adding to FX market volatility, according to RBI Governor Sanjay Malhotra. The unwinding of the trades has helped lift the rupee to near 92.50 per dollar, up from an all-time low of near 95.

Foreign banks have pushed back against the RBI's proposal, citing concerns that sharing data could breach rules in jurisdictions where the trades take place. However, the claim that reporting requirements are "extra-territorial" does not stand, according to a senior treasury official. If the RBI presses ahead with the proposal, its implementation could prove challenging, as it would require coordination with other central banks.

Comparison of Offshore Rupee Trades

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Note: Data is from the Bank for International Settlements for April 2025.