RBI’s $100 Mn Rule May Help Rupee Pare Some Losses

The Reserve Bank of India on Friday issued a directive aimed at limiting the rupee’s fall. The central bank has asked banks to limit their net open positions (NOP) in the rupee to $100 million at the end of each business day, with full compliance required by April 10.

“The Reserve Bank may prescribe limits for open positions involving the rupee (NOP-INR) for exchange rate management, depending on market conditions,” the directive said. “Accordingly, it has now been decided that Authorised Dealers shall ensure that their NOP-INR positions in the onshore deliverable market are maintained within US$100 million at the end of each business day.”

As per a report by The Economic Times, most large and mid-sized banks with net open positions exceeding $100 million are expected to sell dollars to comply with the directive. However, such compliance is likely to result in mark-to-market losses for banks, even though the unwinding of dollar positions could support the rupee. According to the report, banks had lobbied the central bank to apply the rule only to incremental positions after April 10, as aggregate net open positions are estimated at $40 billion.

Traders said that if the gap between rupee-dollar rates in the offshore non-deliverable forwards (NDF) market and the onshore market widens to Re 1, banks could face losses of up to ₹4,000 crore. A net open position refers to the difference between a bank’s dollar purchases and sales. Higher positions effectively mean larger bets on currency movements.

Amid rising geopolitical tensions and inflationary pressures, the rupee has been depreciating faster than expected, with the domestic currency hitting a lifetime low of 94.84 per dollar on Friday. Excess demand for dollars has been driven by importers’ purchases due to a surge in crude oil prices, as well as continued foreign portfolio investor outflows from Indian markets. The rupee has fallen nearly 3.5% against the greenback since the war broke out on February 28. In FY26, the currency has depreciated around 10%.

Forex traders and analysts have warned that the rupee could breach the psychologically crucial level of 95 per dollar by the end of April if the West Asia conflict prolongs. Even in the event of a conflict resolution, traders expect the rupee to remain under pressure, likely stabilising in the range of 93.50–94.30 against the dollar. Some market participants also factor in the possibility of the domestic currency quickly weakening to the 96–97 per dollar range in April if crude oil prices remain elevated.