NewKerala.com

RBI Caps Bank Trading at $100M to Halt Rupee's Slide

The Reserve Bank of India has directed authorized dealer banks to limit their end-of-day open positions in the onshore rupee to $100 million to curb speculative trading and arrest the currency's decline. The rupee has weakened beyond 94 per dollar, pressured by a widening trade gap linked to high crude oil prices and geopolitical conflicts. Analysts note the RBI's aggressive support has depleted forex reserves, limiting further intervention capacity. A recovery in the rupee toward 91 per dollar is projected over the next few months as crude price pressures potentially ease.

Key Points: RBI Imposes $100M Daily Cap to Curb Rupee Speculation

  • RBI caps bank open positions at $100M
  • Aim is to curb rupee speculation
  • Rupee fell below 94/$ amid crude spike
  • Measures to be enforced by April 10
  • High oil prices complicate inflation, currency stability
2 min read

RBI orders banks to impose daily caps to curb speculative trading on rupee

RBI orders banks to limit rupee trading positions to $100M daily by April 10 to curb speculative decline amid high crude prices and conflict risks.

"The central bank mandated that commercial banks must implement the daily cap by April 10 - Reserve Bank of India"

New Delhi, March 28

In a bid to curb speculative trading to cap decline in the Indian rupee, the Reserve Bank of India has ordered banks acting as authorised dealers to limit their end‑of‑day open positions in the onshore rupee to $100 million.

The domestic currency had slid to fresh lows amid widening trade gaps tied to the US-Israel and Iran conflict.

The central bank mandated that commercial banks must implement the daily cap by April 10, adding that the regulator may set different limits depending on evolving market conditions.

Analysts said that the RBI may bring in more measures if depreciation in rupee continues, adding that its support to the currency has sharply reduced its foreign-exchange reserves, limiting its ability to intervene aggressively.

The domestic currency eased below the 94 per dollar mark for the first time on Friday, dipping almost 1 per cent against the greenback, leading to a cumulative of over 4 per cent since the start of the US-Iran war.

Brent crude trading well above $100 per barrel far above the $70 baseline assumption of the RBI in October has raised India's import bill and complicated the central bank's task of balancing inflation and currency stability.

A smart recovery is likely in Indian markets as the crude overhang wanes and price‑earnings (P/E) premiums contract, a recent report had said.

Emkay Global Financial Services, in its latest report, projected that the Indian rupee could bounce back toward Rs 91 per US dollar and the 10‑year government bond yield to ease to about 6.65 per cent from 6.83 per cent currently, with normalisation taking two to three months.

India's overall economic position remains stable despite rise in fuel prices and crude oil prices will be crucial in shaping the country's external balance in FY27, another report had said.

A sustained rise in global crude oil prices could significantly widen India's current account deficit (CAD), and weigh on growth and inflation, it said.

- IANS

Share this article:

Reader Comments

P
Priya S
Good move, but the real issue is the high crude oil price. Every time there's a conflict in the Middle East, our economy feels the pinch. We need a long-term energy strategy, not just currency controls.
R
Rohit P
Rupee at 94 is worrying for imports. My small business is already struggling with increased costs of raw materials. Hope the RBI's measures work quickly.
S
Sarah B
Interesting analysis. The projection of a bounce back to 91 is optimistic but seems plausible if crude prices ease. The RBI is walking a tightrope between inflation and currency defense.
V
Vikram M
With forex reserves depleting, the RBI has limited firepower. Capping speculative positions is a smart, low-cost intervention. We must trust our institutions in these turbulent times.
K
Kavya N
The article mentions the CAD could widen. This is the real danger for our macroeconomic stability. Hope the government is also working on boosting exports to counter this.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50