Market regulator Securities and Exchange Board of India (SEBI) on Thursday revised the limits for taking positions in currency derivatives without establishing underlying exposure, aligning the exchange-traded currency derivatives framework with the Reserve Bank of India's (RBI) revised norms.
Under the revised framework, domestic investors and foreign portfolio investors (FPIs) can take long or short positions of up to $5 million in currency derivatives involving the Indian rupee without having to demonstrate an underlying foreign exchange exposure.
The $5 million limit will apply to the combined outstanding notional value of positions across all currency pairs involving the rupee and across all recognised stock exchanges. This means investors cannot separately avail of the $5 million limit for different currency pairs or exchanges.
The revision follows the RBI's October 10 decision to reduce the threshold for undertaking foreign exchange derivative transactions without establishing underlying exposure to $5 million.
SEBI has specified separate conditions for FPIs taking positions beyond the prescribed limit.