The Reserve Bank of India has proposed changes to rules governing banks' foreign exchange positions as it seeks to put in line the country’s currency risk governance with international standards.

The changes, to come into effect from 1 April 2027, will involve banks computing foreign exchange risk capital requirements on a continuous basis at both consolidated and standalone levels, the RBI said in a draft report.

The amendments to provisions governing the calculations of net open position (NOP) and the associated capital charge for foreign exchange risk required a comprehensive review of the existing instructions.

NOP refers to the difference between banks' total foreign currency assets and liabilities, revealing their exposure to currency fluctuations or exchange rate risk.

The banks will be required to maintain capital for foreign exchange risk at the close of each business day.

"The methodology shall be documented in the bank's risk management policy for structural foreign exchange positions," the central bank said.

The RBI has invited comments to the draft.

The proposed guidelines are more closely aligned with the Basel Committee on Banking Supervision (BCBS) standards, the RBI said.

The RBI will also ensure a consistent implementation across regulated entities, it said.

Revisions include eliminating the separate offshore/onshore NOP calculation and including accumulated surplus from overseas operations in NOP.

Maintenance of the forex risk capital charge on the actual NOP and modifying the Shorthand method for calculation of NOP in alignment with Basel guidelines, which treats open position in gold separately, has also been proposed, it said.

There is also a provision to exempt certain structural forex positions from NOP, the central bank added.