India's central bank on Monday issued a directive compelling banks to disclose offshore rupee derivative trades carried out by their group entities, a step intended to increase transparency in a segment that has added pressure to the Indian currency.
Under the new rule, banks must report all over-the-counter foreign exchange derivative contracts denominated in the rupee and executed globally by their related parties to the trade repository maintained by the Clearing Corporation of India. The reporting obligation applies to both deliverable and non-deliverable contracts. Transactions with a notional value below $1 million are excluded from the requirement.
The change expands the reach of existing reporting rules, which until now mainly captured transactions executed by banks and other onshore entities. At present, Indian banks already report the full set of derivative trades, including those executed by their overseas offices, to the regulator. By contrast, foreign lenders have been reporting only the derivative activity of their India-based units, not trades conducted by offshore affiliates.
Implementation will proceed in stages. Lenders must report transactions conducted by affiliates that cover at least 70% of the notional value of foreign exchange derivative contracts by July 2027. That coverage threshold rises to 80% by January 2028, and to 100% by July 2028. Additionally, banks' parent entities are required to report all offshore rupee trades from July 2027.
The directive brings offshore rupee derivative reporting into the Indian trade repository framework and broadens the population of trades captured under regulatory reporting. The phased timetable sets specific notional coverage milestones leading to full reporting within approximately one year of the initial compliance date.
What this covers
- All OTC foreign exchange derivative contracts involving the rupee executed by group-related entities worldwide must be reported to the Clearing Corporation of India.
- Both deliverable and non-deliverable contracts are in scope; contracts below $1 million are exempt.
- Phased compliance targets: 70% by July 2027, 80% by January 2028, and 100% by July 2028; parent entities must report all offshore rupee trades from July 2027.
The directive modifies the prior reporting perimeter by bringing offshore affiliate activity within the ambit of Indian reporting obligations and aligning bank group reporting responsibilities on a phased schedule.