RBI proposes to tweak how banks compute FX risk exposure

India’s central bank on Wednesday proposed changes to how banks calculate their net foreign exchange exposure and the capital needed to be set aside against potential FX risk.

The proposals are intended to better align norms with global ones and ensure consistent implementation across regulated entities, the Reserve Bank of India said in a statement. The RBI has sought feedback on the rules, which are slated to go into effect from April 1, 2027.

The central bank has proposed doing away with separate calculation of onshore and offshore net open positions for banks.

The regulator has also said banks may exclude certain “structural” FX positions from the net open position calculations. These include foreign-currency denominated investments in subsidiaries, branches and affiliated but non-consolidated entities.

The “shorthand” method for calculating FX risk will also be modified in alignment with global rules to treat open positions in gold separately.

Banks will also need to include all accumulated surplus or un-remitted surplus of overseas operations under the net spot position, the RBI has proposed.