TITLE: India's Reserve Bank Issues Circular Modifying Net Overnight Open Position Requirements for Authorised Dealer Banks
BODY:
On June 23, 2026, the Reserve Bank of India (RBI) issued A.P. (DIR Series) Circular No. 16, which partially modifies guidance on net overnight open position (NOP) requirements for Authorised Dealer Category-I (AD Cat-I) banks.
The circular amends the RBI's previous A.P. (DIR Series) Circular No. 13 dated June 8, 2026, which addressed NOP-INR positions for AD Cat-I banks. Under the modification, AD Cat-I banks must exclude positions arising from hedged transactions related to Foreign Currency Non-Resident (FCNR) (B) deposits, External Commercial Borrowings, and Overseas Foreign Currency Borrowings when computing their net overnight open position. These exclusions apply to hedged transactions raised under the RBI's swap facility circulars issued on June 8, 2026: FMOD.MAOG.No.S-56/01.06.016/2026-27 (covering FCNR (B) deposits) and FMOD.MAOG.No.S-57/01.06.016/2026-27 (covering External Commercial Borrowings and Overseas Foreign Currency Borrowings).
The modification ensures that AD Cat-I banks remain compliant with the provisions of A.P. (DIR Series) Circular No. 24 dated March 27, 2026 and the Master Direction – Risk Management and Inter-Bank Dealings dated July 5, 2016, as amended. The RBI issued these directions under Sections 10(4), 11(1), and 11(2) of the Foreign Exchange Management Act (FEMA), 1999, and they are without prejudice to any permissions or approvals required under other applicable laws.
AD Cat-I banks should review their position-tracking and compliance procedures to incorporate these exclusions when calculating net overnight open positions.
REFERENCES:
https://www.rbi.org.in/