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The RBI’s specified cash reserve imposed on for covered rupee-involving foreign-exchange contracts.
Save conceptThe Foreign Exchange Risk Reserve, or FERR, is a cash requirement introduced by the Reserve Bank of India in October 2026 for a defined group of . must hold cash with the RBI against covered contracts. This is a particular Indian regulatory measure, rather than a universal name for all central-. Its scope and calculation come from the direction introducing it.
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The rule covers rupee-involving contracts whose exceeds US$2 million equivalent, used to where the user purchases foreign against rupees. The dealer must maintain cash equal to 20% of the contract’s rupee-equivalent , daily until termination. It applies to contracts undertaken after issuance. Daily reporting is required, and splitting transactions to evade the requirement is prohibited.
For a hypothetical covered contract of US$3 million, assume the conversion used for this simplified calculation is 100 rupees per dollar. The rupee-equivalent is 300 million rupees. A 20% reserve is therefore 60 million rupees. The dealer maintains that cash under the direction. These are invented teaching values, not the current , a reported trade or an announced fee for a customer.
Distinguish FERR from the customer’s foreign- payment, a fee and the central bank’s international reserve assets. The direction imposes the cash obligation on the dealer; it does not state that the customer pays a 20% charge. Any effect on transaction pricing depends on arrangements beyond the percentage itself. Also preserve the threshold’s strict wording: must exceed the stated amount, and the other transaction conditions must be met.