RBI’s FX position clamp is forcing Indian banks to balance rupee stability against short-term liquidity stress
📌 Indian banks are asking the RBI for a three-month delay to the new foreign-exchange position cap on the rupee, after the central bank required net open positions in the onshore deliverable market to stay below $100 million at the end of each trading day starting April 10.
💡 The sensitive part is that many arbitrage positions between the offshore NDF market and the domestic market are still concentrated in the one- to three-month tenor, so forcing a rapid unwind could trigger one-sided flows, large mark-to-market losses, and short-term disruption in FX liquidity.
⚠️ The move comes as the rupee has just hit a record low of 94.84 per dollar and is down more than 5% since the start of the year, under pressure from higher oil prices and continued foreign capital outflows.
🔎 The market is now focused on the RBI’s next step, because a partial extension or permission to hold legacy positions until maturity could ease near-term stress while still preserving the broader goal of stabilizing the currency.