Zerodha clients have to close FX derivatives positions before April 5 to comply with RBI norms

Zerodha Clients: There is big news for the clients of stock broking firm Zerodha. Zerodha has told its clients that they will have to close the foreign currency derivative positions before April 5 i.e. Friday so that they can comply under the new rules of the Reserve Bank of India. Since April 2, Zerodha is continuously giving this information to its clients.

The stock broking firm said in a post on X that – As per RBI guidelines, traders need to invest in the underlying currency to trade in currency derivatives on the stock exchange. Please ensure to close your open positions before 05 April 2024 to comply with RBI regulations,”

No permission will be given to take new positions in currency – RBI

After implementation from April 4, platform users can exit their current positions but will not be allowed to take new positions in the currency. If users want to take a new position, they will have to submit a declaration form. If traders want to trade in the currency derivatives segment, RBI has made it mandatory for traders to have underlying contracted exposure in foreign currency.

Zerodha further said that for traders with exposure above $100 million (notional contract value), it is mandatory to nominate a custodian partner or authorized dealer. In comparison, for those with smaller exposures, a simple declaration stating currency trading is sufficient to hedge the contractual exposure.

Those who do not submit this declaration form will be unsuccessful in opening new positions in the new segment starting from April. However, the exit position will remain approved. It is advisable to keep a close eye on open positions as liquidity may remain tight till April 5, when the RBI circular becomes effective.

What are the details of RBI guidelines?

According to RBI guidelines, contracted exposure means currency risk arising out of current or capital account transactions under FEMA, 1999 or any rules or regulations made thereunder.

How to submit declaration form?

Download Declaration Form (PDF)

Sign the declaration form (e-sign/wet sign)

Create a ticket to submit the soft copy of the declaration form.

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