RBI increases its examination of private and foreign banks' treasury activities and derivatives books.

The Reserve Bank of India (RBI) has stepped up its oversight of private and international banks' treasury operations, derivatives books, and foreign exposure trade hedging, sources with knowledge of the situation told Moneycontrol. IndusInd Bank revealed disparities earlier this year, which prompted the heightened examination. According to the sources, the central bank is also looking at the derivatives portfolio and closely investigating the specifics of trades made in the derivatives books by international and private banks five to six years ago in order to hedge against foreign money. The central bank has begun examining the banks' derivatives accounts for the second time. Prior to this, Moneycontrol reported on March 12 that the RBI had started reviewing the derivative accounts of state-owned and private banks following IndusInd Bank's revelation of accounting irregularities pertaining to currency derivatives. Moneycontrol has emailed the RBI about this issue, but the RBI has not yet replied. When the response is received, the story will be updated. After the central bank stated in its annual report that it would continue with supervisory initiatives aimed at early risk and vulnerability identification, increase the focus on the root cause of vulnerabilities, and harmonize the supervisory rigor across various financial system segments, the level of supervision has increased. The Reserve Bank of India (RBI) has escalated its scrutiny of the treasury operations and derivatives portfolios of private and foreign banks following the revelation of irregularities by IndusInd Bank earlier this year. According to sources familiar with the matter, the central bank is not only examining current practices but is also delving into derivatives trades executed as far back as five to six years ago. These historical transactions are being reviewed to assess how banks hedged their foreign currency exposures and whether these actions complied with regulatory norms. This marks the second time in recent months that the RBI has launched a thorough review of banks' derivative books. In March, the regulator had already initiated checks on both public and private banks’ currency derivative transactions after IndusInd’s disclosures highlighted potential lapses in accounting practices. Now, the renewed inspection suggests a more comprehensive and systemic effort to strengthen risk controls, with a special focus on international banks operating in India. The RBI’s enhanced vigilance stems from its broader supervisory strategy to identify risks early and impose consistent regulatory standards across financial institutions. In its latest annual report, the RBI stated its intent to address the root causes of vulnerabilities and harmonize the intensity of oversight across all banking segments. This effort is not limited to recent transactions but also includes a retrospective analysis to ensure that past practices were sound and transparent.