Tweaks to ease speculative offshore trading may not alter RBI's stance on NOP-INR soon
April 21, 2026
The central bank had eased some of the restrictions placed on the offshore NDF market on April 20
The Reserve Bank of India’s (RBI) partial easing of curbs in the offshore non-deliverable forwards (NDF) market are not likely to change the central bank’s stance on the net open position for the Indian rupee (NOP-INR), according to market participants, as geopolitical uncertainties, along with persistently elevated Brent crude prices, do not look to taper down any time soon.
On April 20, the central bank released a notification that withdrew some of the restrictions imposed on forex dealers taking positions in the offshore non-deliverable forwards market (NDF) to curb rupee volatility.
Authorised dealers can again start offering non-deliverable derivative contracts involving the rupee to resident or non-resident users, the central bank said. They can also permit a user to rebook any foreign exchange derivative contract involving the rupee.
The RBI Governor, on April 8, while addressing the media after the Monetary Policy announcements, said these measures were temporary, as they had seen speculative positions being built in the arbitrage market in March, and had to clamp down on excessive volatility.
Even then, the RBI has not eased the limit for the net open positions for the local currency. Market participants say that this limit will continue until more clarity emerges on the Indian rupee’s moves in the near-term.
“By retaining NOP limits, it (RBI) is ensuring that arbitrage-driven or directional trades do not rebuild in a way that could amplify volatility and leave the rupee exposed to external shocks,” Kunal Sodhani, head of treasury at Shinhan Bank, said.
The geopolitical tensions between the US and Iran have shown no signs of abating in the near future. As a result, Brent crude prices, even though they are still a tad below $100 per barrel, may shoot up should there be any more escalation.
“Under such conditions, the RBI is likely to remain cautious, preferring tighter control over speculative exposures until there is clearer stability in external conditions,” Sodhani said.
On March 27, the RBI introduced this limit, which was considered unusual, to curb currency volatility. The first time the RBI pulled off such a move was nearly 15 years ago in 2011.
Banks were given time till April 10 to unwind all of their excessive speculative trades in the offshore NDF market. However, on March 30, the rupee breached the psychological level of Rs 95 per dollar, briefly touching an all-time low of Rs 95.21 per dollar.
Following this, more restrictions were placed by the RBI, which prohibited authorised dealers from offering non-deliverable forwards contracts to residents and non-residents, and added that they are not supposed to permit any re-booking of a forex derivatives contract which has already been cancelled. By the end of April 10, nearly $40 billion worth of arbitrage trades were said to be unwound by banks.
Since then, the rupee has recovered nearly 2 percent to now trade at near Rs 93 per dollar levels. On a year-to-date basis, the rupee has lost 3 percent, with much of the depreciation coming during the onset of the West Asia war.
However, there could be a slight catch here as well, traders say. “With more freedom for hedging, dollar demand is likely to increase in the near term, especially from importers rushing to cover exposures. That adds another layer of pressure on the rupee,” Amit Pabari, managing director at CR Forex Advisors, said.
At 12:30 IST, the rupee was trading at Rs 93.41 to the dollar, as compared to the closing level of Rs 93.13 per dollar in the previous trading session.
On April 20, the central bank released a notification that withdrew some of the restrictions imposed on forex dealers taking positions in the offshore non-deliverable forwards market (NDF) to curb rupee volatility.
Authorised dealers can again start offering non-deliverable derivative contracts involving the rupee to resident or non-resident users, the central bank said. They can also permit a user to rebook any foreign exchange derivative contract involving the rupee.
The RBI Governor, on April 8, while addressing the media after the Monetary Policy announcements, said these measures were temporary, as they had seen speculative positions being built in the arbitrage market in March, and had to clamp down on excessive volatility.
Even then, the RBI has not eased the limit for the net open positions for the local currency. Market participants say that this limit will continue until more clarity emerges on the Indian rupee’s moves in the near-term.
“By retaining NOP limits, it (RBI) is ensuring that arbitrage-driven or directional trades do not rebuild in a way that could amplify volatility and leave the rupee exposed to external shocks,” Kunal Sodhani, head of treasury at Shinhan Bank, said.
The geopolitical tensions between the US and Iran have shown no signs of abating in the near future. As a result, Brent crude prices, even though they are still a tad below $100 per barrel, may shoot up should there be any more escalation.
“Under such conditions, the RBI is likely to remain cautious, preferring tighter control over speculative exposures until there is clearer stability in external conditions,” Sodhani said.
On March 27, the RBI introduced this limit, which was considered unusual, to curb currency volatility. The first time the RBI pulled off such a move was nearly 15 years ago in 2011.
Banks were given time till April 10 to unwind all of their excessive speculative trades in the offshore NDF market. However, on March 30, the rupee breached the psychological level of Rs 95 per dollar, briefly touching an all-time low of Rs 95.21 per dollar.
Following this, more restrictions were placed by the RBI, which prohibited authorised dealers from offering non-deliverable forwards contracts to residents and non-residents, and added that they are not supposed to permit any re-booking of a forex derivatives contract which has already been cancelled. By the end of April 10, nearly $40 billion worth of arbitrage trades were said to be unwound by banks.
Since then, the rupee has recovered nearly 2 percent to now trade at near Rs 93 per dollar levels. On a year-to-date basis, the rupee has lost 3 percent, with much of the depreciation coming during the onset of the West Asia war.
However, there could be a slight catch here as well, traders say. “With more freedom for hedging, dollar demand is likely to increase in the near term, especially from importers rushing to cover exposures. That adds another layer of pressure on the rupee,” Amit Pabari, managing director at CR Forex Advisors, said.
At 12:30 IST, the rupee was trading at Rs 93.41 to the dollar, as compared to the closing level of Rs 93.13 per dollar in the previous trading session.