India moves to tighten watch on offshore rupee trades

The Clearing Corp. of India Ltd (CCIL) is rebuilding its trade reporting infrastructure, a move that will for the first time capture offshore rupee transactions in a standardized, globally comparable format as part of a sweeping regulatory push to rein in a currency market that has grown increasingly difficult to monitor, Bloomberg reported, citing people familiar with the matter.

The overhaul, which began earlier this year, is being driven by pressure from the Reserve Bank of India (RBI) as it steps up scrutiny of how the rupee is traded beyond domestic borders.

The CCIL’s trade repository is being upgraded with new data fields designed to accommodate customized and bespoke derivative structures that its existing system was never built to handle, Bloomberg reported.

The rupee recently slid to a record low near 95 per dollar as oil prices surged in the wake of the Iran war, before recovering to around 92.50 after the central bank moved to unwind large speculative positions of about $40 billion in non-deliverable forward (NDF) trades that regulators say were distorting price signals onshore.

The offshore NDF market has long been a blind spot for Indian policymakers. Cross-border rupee trades reached $60 billion in April 2025, accounting for close to two-thirds of all turnover in the outright forward market, according to Bank for International Settlements data. Yet until recently, the RBI had limited visibility into how that volume was being built up or by whom.

The proposed reporting mandate, floated by the RBI in February, would require Authorized Dealer Category-I banks to disclose all offshore rupee derivative transactions conducted by their related entities globally, routing that data to CCIL’s trade repository.

Banks would eventually need to cover at least 70% of such transactions, with the compliance threshold phasing in over 24 months beginning February 2027.

The banking industry has pushed back hard. Foreign lenders argue the requirements could force them to share client data across jurisdictions in ways that conflict with local privacy and financial regulations, Bloomberg reported, citing people aware of the discussions.

Indian regulators have been largely unsympathetic to those objections, contending that any bank holding a domestic license cannot treat rupee-related reporting obligations as falling outside the RBI’s reach.

The central bank has already restricted local lenders from offering certain non-deliverable derivative products and cracked down on arbitrage strategies that exploit gaps between onshore and offshore pricing.

The CCIL already hosts India’s government bond trading platforms and collects some data on offshore currency activity. No deadline has been set for completing the system upgrade, Bloomberg reported.