SEBI caps unhedged INR currency derivative positions at USD 5 million

On 5 November 2026, the Securities and Exchange Board of India issued a circular revising the threshold for taking positions in exchange-traded currency derivatives involving the Indian rupee without establishing underlying exposure. Economic Times and Moneycontrol both report that the change follows the Reserve Bank of India's A.P. (DIR Series) Circular No. 25 dated 10 October 2026, and that SEBI has rewritten Clause 5.3.3 of its stock exchange master circular to match.

Under the revised text, domestic clients and foreign portfolio investors may take long or short positions in INR-linked currency derivatives without proving underlying exposure up to a single outstanding notional limit of USD 5 million across all INR currency pairs and across all recognised stock exchanges. FPIs must also keep short positions in foreign currency-INR pairs within that USD 5 million ceiling. For long positions above the limit, FPIs need underlying exposure in Indian debt or equity securities, including mutual fund units.

Domestic clients can still go above USD 5 million, but only under the conditions in RBI's Master Direction on Risk Management and Inter-Bank Dealings and the October circular, including documentation that the same exposure is not double-hedged. Moneycontrol notes that RBI also tightened cancellation and rebooking rules for FX derivative contracts after 10 October 2026. SEBI has directed exchanges and clearing corporations to update systems, bye-laws and member notices and to report implementation status.

The rewrite matters for fintech brokers, custodians and FPI desks that warehouse INR FX risk on exchange. A single combined USD 5 million unhedged pocket replaces fragmented pair-by-pair headroom, so compliance, position monitoring and client onboarding workflows need a clean cutover rather than a soft tweak.