RBI Saves the Rupee, But At What Cost? Why Global Investors Are Getting Nervous
April 11, 2026
RBI’s aggressive steps to stabilise the rupee have boosted the currency but unsettled global investors, raising concerns over policy unpredictability, rising hedging costs, and potential long-term impact on foreign inflows., Economy, Times Now
New Delhi: India’s central bank, the Reserve Bank of India (RBI), has taken one of its strongest steps in a decade to support the falling rupee. But while the move has helped the currency recover slightly, it may also be worrying global investors who put money into India.
The rupee had been hitting record lows amid global tensions, including the recent US-Israel-Iran war. To stop the fall, the RBI forced banks to cut down on bets against the rupee. These bets are usually made by traders who expect the currency to weaken.
Since these steps, the rupee has risen more than 2% to 92.66 per dollar. But this recovery has come at a cost. According to Jefferies, banks may face losses of up to Rs 50 billion ($539 million) because they had to quickly close their positions. Hedging costs, the price investors pay to protect themselves from currency risk, have also gone up sharply.
At the same time, foreign investors have started pulling money out of Indian bonds, with nearly $1 billion sold off recently.
The RBI introduced strict limits on how much banks can trade in currency markets. It capped daily positions at $100 million and later extended curbs to offshore markets as well. Offshore markets are places like London and Singapore where traders can bet on the rupee without actually holding it.
One key restriction was on something called non-deliverable forwards (NDFs) — a type of contract that allows investors to bet on a currency’s future value without physically exchanging it. These are widely used by global investors.
Some bankers told Bloomberg that clients were surprised by the RBI’s action and questioned why such large speculative positions were allowed to build up in the first place.
There is also concern that India may be stepping back from years of financial reforms. After the 2013 “taper tantrum” - when global investors pulled money out of emerging markets - India worked hard to open up its markets and attract foreign capital. These efforts even helped India get included in a major global bond index in 2024.
There are already signs of stress. Costs for currency hedging have jumped to their highest levels in years, and the gap between onshore (India-based) and offshore markets is widening. This makes it harder and more expensive for investors to manage risk.
For now, the RBI says the measures are temporary. Governor Sanjay Malhotra has said the central bank remains committed to making the rupee more global and that these steps will not stay forever.
The rupee had been hitting record lows amid global tensions, including the recent US-Israel-Iran war. To stop the fall, the RBI forced banks to cut down on bets against the rupee. These bets are usually made by traders who expect the currency to weaken.
Since these steps, the rupee has risen more than 2% to 92.66 per dollar. But this recovery has come at a cost. According to Jefferies, banks may face losses of up to Rs 50 billion ($539 million) because they had to quickly close their positions. Hedging costs, the price investors pay to protect themselves from currency risk, have also gone up sharply.
At the same time, foreign investors have started pulling money out of Indian bonds, with nearly $1 billion sold off recently.
The RBI introduced strict limits on how much banks can trade in currency markets. It capped daily positions at $100 million and later extended curbs to offshore markets as well. Offshore markets are places like London and Singapore where traders can bet on the rupee without actually holding it.
One key restriction was on something called non-deliverable forwards (NDFs) — a type of contract that allows investors to bet on a currency’s future value without physically exchanging it. These are widely used by global investors.
Some bankers told Bloomberg that clients were surprised by the RBI’s action and questioned why such large speculative positions were allowed to build up in the first place.
There is also concern that India may be stepping back from years of financial reforms. After the 2013 “taper tantrum” - when global investors pulled money out of emerging markets - India worked hard to open up its markets and attract foreign capital. These efforts even helped India get included in a major global bond index in 2024.
There are already signs of stress. Costs for currency hedging have jumped to their highest levels in years, and the gap between onshore (India-based) and offshore markets is widening. This makes it harder and more expensive for investors to manage risk.
For now, the RBI says the measures are temporary. Governor Sanjay Malhotra has said the central bank remains committed to making the rupee more global and that these steps will not stay forever.