The Reserve Bank of India has proposed changes to foreign exchange rules that seek to offer authorised market participants greater flexibility to trade across electronic platforms while retaining key risk management limits.
A Reserve Bank notification shows the proposed rules allow banks to trade on electronic trading platforms outside India. They would also allow banks to utilise surplus foreign currency balances for investments in long-term overseas debt instruments issued by a foreign state.
Key changes proposed
As per the RBI notification, authorised dealers may undertake transactions on electronic trading platforms outside India, provided the operator is set up in a country which is a member of the Financial Action Task Force (FATF) and the transaction is regulated by a financial market regulator.
-Secondly, the authorised dealers may undertake transactions not involving INR on overseas exchanges, provided that the overseas exchange is located in a country which is a member of the FATF and is regulated by a financial market regulator
Further, according to the RBI, authorised dealers are permitted to use undeployed foreign currency deposits for investments in long-term overseas debt instruments issued by a foreign state whose maturity does not exceed that of the deposit.
Reserve Bank notification stated that wholly owned subsidiaries and joint ventures of authorised dealers incorporated in India would be permitted to undertake non-deliverable FX derivative transactions, provided that the subsidiary or joint venture is a banking entity.
RBI’s govt securities purchase
Separately, in order to support liquidity in the banking system, the Reserve Bank has purchased government securities equivalent to 47 per cent of the Centre’s total bond issuances so far in FY26.
As per a PTI report, the Centre raised Rs 13,65,000 crore from April 4, 2025, to February 13 this year by issuing government securities as part of its gross borrowing programme. In parallel, the RBI conducted Open Market Operations (OMO) purchase auctions totalling Rs 6,39,203 crore, injecting durable liquidity into the banking system.
The large-scale purchases came amid sustained government borrowing, which typically absorbs liquidity from the banking system and exerts upward pressure on bond yields. By buying bonds from the secondary market, the central bank infused liquidity and helped maintain orderly market conditions, the report said.