RBI removes non-option derivative limits for Small Finance Banks
The Reserve Bank of India has removed specific limits on non-option derivative contracts for Small Finance Banks with immediate effect.
- Document
- Notifications
- Dated
- 19 Oct 2026
- Effective
- October 19, 2026
- Act by
- October 19, 2026
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The Reserve Bank of India deleted paragraph 37 governing non-option derivative limits.
- This regulatory change applies immediately to all registered Small Finance Banks.
- Small Finance Banks must update their internal treasury policies accordingly.
In short
The Reserve Bank of India issued notification RBI/2026-27/295 to update the rules for Small Finance Banks. It removes the specific operational restrictions previously placed on non-option derivative contracts.
What has changed
How it worked before
Small Finance Banks had to strictly follow specified cap limits on non-option derivative contracts—agreements like swaps with mandatory execution—under paragraph 37 of Chapter IV in the 2025 directions.
What has changed
Paragraph 37 of Chapter IV in the Reserve Bank of India (Small Finance Banks - Miscellaneous) Directions, 2025 is deleted. The standalone limit on non-option derivative contracts no longer applies under these miscellaneous rules.
Who this affects
Treasury officers and compliance managers at all licensed Small Finance Banks in India.
An example
A licensed Small Finance Bank handles financial risk using forward contracts to manage interest rates. Previously, the treasury team had to ensure these transactions stayed within the specific caps set by paragraph 37. With this Reserve Bank of India update, those explicit limits are removed, allowing the bank to align its trades with general banking guidelines.
What you should do
Small Finance Banks should update their internal treasury frameworks and compliance manuals to reflect the removal of paragraph 37 limits.
Deadline · October 19, 2026If you do nothing
If a bank does not update its internal manuals, it may unnecessarily restrict its treasury operations based on repealed limits. The document does not specify a monetary penalty, but banks are expected to keep policies aligned with current Reserve Bank of India rules.
The terms explained
- Small Finance Bank
- A specialized bank licensed in India to provide basic banking services to unserved and underserved groups.
- non-option derivative contract
- A binding financial agreement, like a forward or swap, whose value depends on an underlying asset.
- treasury policy
- A bank's internal rules for managing its cash, investments, and financial risks.
The original document
| Issued by | RBI |
|---|---|
| Document | Notifications |
| Full title | Reserve Bank of India (Small Finance Banks - Miscellaneous) Amendment Directions, 2026 |
| Issued on | 19 October 2026 |
| Effective | October 19, 2026 |
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