RBI Sets Out Next-Decade Priorities for India’s Forex Market: Simpler Rules, Better Retail Pricing and More Digital Processing

The Reserve Bank of India has set out a broad agenda for the next phase of development of India’s foreign-exchange market, calling for simpler rules, stronger judgement by authorised dealers, more transparent retail pricing, greater use of local currencies and end-to-end digital processing.

In a keynote address delivered at the Annual Day of FEDAI on August 14 and released by the RBI on August 19, Deputy Governor Rohit Jain said the market should be able to support India’s growing international engagement, absorb shocks without disruption, serve small users as efficiently as large corporates and adopt new technology without weakening trust.

Forex market has expanded sharply

The Deputy Governor said India’s foreign-exchange reserves have risen from about US$38 billion in 2000 to about US$691 billion in 2026. Average daily turnover in the domestic spot and derivatives market has doubled from about US$41 billion in FY22 to around US$80 billion, while notional outstanding in rupee derivatives has grown nearly fourfold since FY21 to about ₹130 lakh crore.

He also cited the BIS Triennial Survey, which estimated combined onshore and offshore daily rupee turnover at US$185 billion in 2025, compared with US$119 billion in 2022. Registrations in the CCIL trade repository for forex derivatives doubled from about 43,000 in 2019 to 87,000 in 2025.

Four drivers for the coming decade

The RBI identified four broad forces: delegation to authorised dealers, customer-centric business processes, greater use of local currencies in cross-border trade and technology across the customer chain.

On delegation, the RBI’s direction is toward fewer prior approvals, a simpler rulebook, risk-based reporting and greater reliance on board-approved policies of authorised dealers. The Deputy Governor cautioned, however, that banks should not recreate removed regulatory burdens through internal checklists or inconsistent branch-level documentation.

Retail forex pricing and customer experience under scrutiny

The RBI said the FX-Retail facility has offered individuals and MSMEs access to competitive interbank pricing since 2019 but adoption has remained modest because of uneven bank onboarding and low customer awareness. The Bharat Connect pilot, launched in October 2025, is intended to bring forex transactions into channels customers already use and is expected to expand across more banks, currency pairs and user categories.

The speech also referred to supervisory findings of multiple documentation requirements and delays in cross-border remittances. Authorised dealer banks have been advised through FEDAI to maintain clear policies covering documentation, process and approving authority, charges, timelines, escalation and grievance redress, with disclosures available on websites and at branches.

Local-currency trade and technology

The Special Rupee Vostro Account framework remains central to RBI’s push for trade settlement in local currencies. The Deputy Governor said practical success depends on genuine two-way trade corridors, correspondent relationships, competitive conversion and hedging solutions, productive use of rupee balances and strong AML/CFT and operational controls.

For technology, the RBI’s stated goal is a forex transaction chain that is digital from origination to reporting: data captured once with consent, electronic document verification, regulatory data drawn from trusted sources, consistent rule application and reporting generated as part of transaction processing rather than as a separate month-end exercise.

Recent FEMA reforms need operational readiness

The speech highlighted the Authorised Persons Regulations, 2026, the Guarantees Regulations, 2026 and the Export and Import of Goods and Services Regulations, 2026. The latter are due to come into force on October 1, 2026 and give authorised dealers more flexibility in areas such as extensions, reductions, set-off and third-party receipts and payments, while recognising longer realisation periods for rupee-invoiced transactions and simplified closure of specified small-value entries.

For banks, finance teams and advisers handling cross-border transactions, the message is operational as much as regulatory: update internal policies, train staff, remove obsolete documentation practices, improve customer disclosures and ensure that new regulatory flexibility reaches the end user.

Useful official links

RBI speech on the future of India's forex market

Key takeaway

The RBI published a fresh, detailed policy speech with concrete expectations for banks and forex intermediaries and new data on market scale.