India's central bank tightens rules on rupee non — deliverable contracts, widens 20% cash reserve requirement

Oct 12 (Reuters) — The Reserve Bank of India on Monday tightened rules on rupee non-deliverable derivative contracts, limiting overseas clients to using them only for hedging, and widened a 20% cash reserve requirement to banks' own rupee currency hedges. The move is the latest in a slew of measures announced by the central bank since Saturday aimed at supporting the rupee, which has been falling due to steep oil prices and capital outflows Banks with units in India's International Financial Services Centre and some primary dealers, which until now could offer non-deliverable rupee derivatives to non-resident users for any purpose, can now offer them only for hedging, the RBI said Monday Authorised dealers will also be required to maintain a foreign exchange risk reserve for foreign exchange derivative contracts involving the rupee undertaken to hedge the currency risk of their own assets and liabilities The reserve applies to all rupee currency contracts in which the authorised dealer buys foreign currency against the rupee, and equals 20% of the rupee equivalent of the notional amount of each contract The reserve must be deposited in cash with the RBI daily and kept until the con