India to push for reporting of offshore Indian rupee trades despite resistance, sources say

MUMBAI: India plans to move ahead with a proposal mandating that banks report offshore rupee derivative trades despite objections from lenders, two sources familiar with the matter said, in an attempt to bring transparency to a market that has amplified pressure on the currency.

In February, the Reserve Bank of India proposed that banks report rupee foreign exchange derivative transactions undertaken globally by their related parties, arguing it would support more efficient price discovery.

The RBI wants lenders to start sharing data on at least 70% of such derivative transactions, starting February 2027.

Domestic banks are already required to report all derivative transactions, including by their overseas offices. Foreign lenders currently only report derivatives traded by their India units and not those executed by offshore ones.

The RBI proposal is aimed at levelling the playing field between Indian and foreign banks, the first source familiar with the central bank’s thinking said.

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“There was no clarity on what these NDF trades were, making the RBI’s task (of managing the rupee) complicated,” the person said.

Both the sources requested anonymity since they are not authorised to speak to the media.

The RBI did not immediately respond to an email seeking comment.

Offshore market

The large offshore forward market has a significant sway over the rupee’s exchange rate, an influence that has heightened since the RBI opened the market to Indian banks and companies.

Data from the Bank for International Settlements showed that cross-border trades involving the Indian rupee amounted to about $60 billion, or roughly two-thirds of total turnover in the outright forward market, in April 2025.

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, RBI Governor Sanjay Malhotra said on Wednesday. The unwinding of the trades has helped lift the rupee to near 92.50 per dollar from an all-time low of near 95.

Push-back from banks

Foreign banks have pushed back against the RBI’s proposal, citing concerns that sharing of the data could breach rules in jurisdictions where the trades take place, according to two senior treasury officials directly aware of the matter.

The claim that reporting requirements are “extra-territorial” does not stand, the second source said, adding that banks licensed to operate in India cannot treat reporting requirements on rupee transactions as outside the central bank’s jurisdiction.

If the RBI presses ahead with the proposal, its implementation could prove challenging, the treasury officials said.

Reporting transactions carried out in other countries would need coordination with other central banks, which could be difficult, one of them said.

The treasury officials declined to be identified since they are not authorised to speak to the media.