Currency risk basics for small Indian exporters: USD-INR exposure, AD bank hedging under RBI rules, plus a labelled toy example. Tip. Checked: 2026-09-24.
Checked: 2026-09-24
Forex hedging is regulated under FEMA and RBI directions. This page is educational, not investment or legal advice. Confirm products and documentation with your AD Category-I bank.
If you invoice in US dollars (or another foreign currency) and pay costs in rupees, a move in USD-INR changes your INR proceeds. Marketplace payouts that settle later still leave FX timing risk until the credit hits your account.
Natural habits help: shorter quotation validity, knowing your INR cost floor, and treating FX as a line in the margin model. They do not remove the need for bank products when exposures are large.
Permissible hedging of contracted or anticipated forex exposures runs through AD Category-I banks under the RBI Master Direction - Risk Management and Inter-Bank Dealings. Re-open that Master Direction before citing paragraph numbers; RBI updates the same URL.
Forward contracts, cancel-and-rebook, and related documentation also reflect FEDAI market practice. Ask your bank how they apply FEDAI to your deal. Do not DIY hedges outside the bank channel.
If an invoice is USD 10,000, a Rs 0.50 per USD move changes INR proceeds by Rs 5,000 before fees. Your margin impact depends on your cost base. This is arithmetic, not a prediction of where USD-INR will go.