RBI Asks Banks to Disclose Big Dollar Deals as Rupee Slides Toward 92

Reserve Bank of India is turning up the heat on currency speculation. The central bank has asked commercial banks to share detailed information about their foreign exchange transactions, a move widely seen as a signal that it wants to rein in aggressive bets against the rupee.

RBI has specifically requested data on transactions in three markets; the spot market, forward market and the offshore non-deliverable forward (NDF) market, according to Economic Times.

For any deal exceeding $10 million, banks must now disclose who the client is and why they are buying or selling dollars.

Notably, when the RBI asks for this kind of data, most banks treat it as a nudge to scale back speculative positions.

A senior banker told ET that even if the RBI allows the rupee to weaken, it wants that to happen at a pace it controls, not because of unchecked speculation.

The pressure on the rupee is coming from several directions at once. Large companies, anticipating further weakness, are buying dollars in advance, over and above what they actually owe on imports.

Meanwhile, banks and multinationals are playing the gap between offshore and domestic markets, selling in the NDF market abroad and buying in the local forward market to pocket the price difference. On top of that, banks themselves are running larger trading positions within their permitted limits.

This dynamic creates a self-reinforcing cycle. When the rupee looks vulnerable, the dollar trades at a premium in the NDF market. That premium then bleeds into the domestic market, putting further downward pressure on the currency.

The rupee has depreciated nearly 5% in six months, slipping from 88 to close to 92 against the dollar, and closing at 91.74 on Friday.

The slide has been driven by a combination of factors. First, a widening current account deficit, muted foreign portfolio investment, geopolitical tensions, gold imports, and fears of rising crude oil prices.

The RBI has allowed this gradual depreciation rather than aggressively defending a fixed level. There was also a period of uncertainty around India's trade negotiations with the US. When a deal appeared to materialise, sentiment briefly improved and the rupee recovered to around 90.10. But, fresh tensions in West Asia have since clouded the picture again.