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Topic 166 · Economy, Budget & Banking

RBI bars banks from offshore rupee NDDs

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Revise the 12 points first Book 1 RATNA
  1. Core Trigger: On 1 April 2026 the RBI barred authorised dealer banks from offering rupee non-deliverable derivative contracts to residents and non-residents.
  2. Reason: The step came with the rupee past 95 to the dollar, to defend the currency.
  3. Current Head: The Reserve Bank of India is headed by Governor Sanjay Malhotra.
  4. Key Term: A non-deliverable derivative is cash-settled in dollars; no rupees change hands across borders.
  5. Data: The rupee was past 95 per dollar; the contracts are settled in offshore hubs such as Singapore and Dubai.
  6. Stakeholders: Authorised dealer banks and their resident and non-resident clients were covered by the bar.
  7. India Link: The contracts had become a channel through which speculative pressure reached the onshore rupee market.
  8. Headquarters: The RBI's central office is in Mumbai, Maharashtra.
  9. Founded: The RBI was established on 1 April 1935 under the RBI Act, 1934, and nationalised on 1 January 1949.
  10. Landmark: The Foreign Exchange Management Act, 1999 replaced FERA, 1973, and came into force on 1 June 2000.
  11. Statutes: Section 3 of FEMA bars dealing in foreign exchange except through authorised persons; Entry 36, Union List covers foreign exchange.
  12. Doctrine: A derivative's value derives from an underlying asset; hedging offsets risk, while speculation seeks profit from price moves.
Question 1 of 10

On 1 April 2026 the RBI barred authorised dealer banks from offering which product?

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Answer: (B) Rupee non-deliverable derivatives

Core Trigger: On 1 April 2026 the RBI barred authorised dealer banks from offering rupee non-deliverable derivative contracts to residents and non-residents.From Book 1 RATNA, topic 166, point 1

Question 2 of 10

Why did the RBI impose the bar?

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Answer: (D) To defend the rupee past 95 per dollar

Reason: The step came with the rupee past 95 to the dollar, to defend the currency.From Book 1 RATNA, topic 166, point 2

Question 3 of 10

Which Governor heads the Reserve Bank of India?

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Answer: (C) Sanjay Malhotra

Current Head: The Reserve Bank of India is headed by Governor Sanjay Malhotra.From Book 1 RATNA, topic 166, point 3

Question 4 of 10

How is a non-deliverable derivative settled?

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Answer: (B) Cash in dollars

Key Term: A non-deliverable derivative is cash-settled in dollars; no rupees change hands across borders.From Book 1 RATNA, topic 166, point 4

Question 5 of 10

In which offshore hubs are these contracts settled?

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Answer: (A) Singapore and Dubai

Data: The rupee was past 95 per dollar; the contracts are settled in offshore hubs such as Singapore and Dubai.From Book 1 RATNA, topic 166, point 5

Question 6 of 10

Whom did the bar cover besides authorised dealer banks?

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Answer: (D) Resident and non-resident clients

Stakeholders: Authorised dealer banks and their resident and non-resident clients were covered by the bar.From Book 1 RATNA, topic 166, point 6

Question 7 of 10

In which city is the RBI's central office located?

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Answer: (C) Mumbai

Headquarters: The RBI's central office is in Mumbai, Maharashtra.From Book 1 RATNA, topic 166, point 8

Question 8 of 10

Consider: 1. The RBI was established on 1 April 1935. 2. It was nationalised on 1 January 1947. Which is/are correct?

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Answer: (A) Only 1

Founded: The RBI was established on 1 April 1935 under the RBI Act, 1934, and nationalised on 1 January 1949.From Book 1 RATNA, topic 166, point 9

Question 9 of 10

Which Act did FEMA, 1999 replace?

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Answer: (D) FERA, 1973

Landmark: The Foreign Exchange Management Act, 1999 replaced FERA, 1973, and came into force on 1 June 2000.From Book 1 RATNA, topic 166, point 10

Question 10 of 10

Consider: 1. Section 3 of FEMA bars forex dealing except through authorised persons. 2. Entry 36, Union List covers foreign exchange. Which is/are correct?

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Answer: (C) Both 1 and 2

Statutes: Section 3 of FEMA bars dealing in foreign exchange except through authorised persons; Entry 36, Union List covers foreign exchange.From Book 1 RATNA, topic 166, point 11

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