RBI had issued the Master Direction on ‘Risk Management and Inter-Bank Dealings’ on July 5, 2016, as updated from time to time (‘Master Direction’), to formulate the modalities on how foreign exchange business, specifically derivative contracts, will be conducted by authorized persons, within the relevant regulatory framework. Pursuant to the Master Direction, AD Cat-I Banks in India, operating an International Financial Services Centre (‘IFSC’) Banking Unit (‘IBU’) were permitted to transact in Non-Deliverable Derivative Contracts (‘NDDCs’) involving Indian Rupees. The RBI has now, by way of a Circular dated September 22, 2025, also permitted Standalone Primary Dealers (‘SPDs’) authorised as Authorised Dealer Category-III Banks (‘AD Cat-III Banks’) to transact in NDDCs involving Indian Rupees.

Pursuant to this Circular, SPDs authorised as AD Cat-III Banks may now offer NDDCs involving INR to both residents and non-residents. The Master Direction has been amended to reflect this change, and relevant references to SPDs have been incorporated in the applicable paragraphs.