March 29, 2020

The Reserve Bank of India (RBI) has decided to permit banks in India, which operate International Financial Services Centre Banking Units (IBUs), to participate in the non-deliverable forward (NDF) market with effect from June 1, 2020.


  • NDFs are foreign exchange derivative instruments on non-convertible or restricted currencies traded over the counter (OTC) mainly at offshore centres outside the direct jurisdiction of the respective national authorities.

  • The RBI took the decision despite the recommendation by a task force set up by it against allowing banks in the NDF market. The task force submitted its report in July 2019.

  • The Task Force on Offshore Rupee Markets, set up by the RBI, had proposed that Indian banks should not be permitted to deal in the offshore rupee derivative market — or the NDF market — for the present as the downside of permitting them to deal in this market outweighs the advantages.