The rupee opened about 119 paise stronger on Monday, one of its strongest opening levels in recent times, due to an RBI directive which forced banks authorised to deal in foreign exchange to unwind long dollar positions in the domestic forex market.
The Indian currency opened at 93.62 per US dollar against the previous close of 94.8125 per US dollar, which was a record low.
In intraday trades so far, the rupee hit a high/ low of 93.57/93.98 per USD. It is currently trading at 93.88.
The direction, which was issued after market hours on March 27, asks authorised dealers to ensure that their Net Open Position – Indian Rupee (NOP-INR) in the onshore deliverable market should be maintained within US$ 100 million at the end of each business day.
This comes in the wake of the rupee weakening about 4 per cent since the West Asia war began on February 28, 2026. It could reduce large bets against the Indian currency and prevent sharp movements. The last time the central bank issued such a directive was about 15 years back.
K Arvind, Head – Treasury, Tamilnad Mercantile Bank, said: “Banks’ holding long position adds to the demand for dollars. So, RBI wants them to reduce the net open position to within $100 million.”
“Therefore, banks will exit their long positions in the domestic deliverable market. So, they will have to automatically reduce their short position in the NDF (non-deliverable forward) market also,” he added.
Large banks to feel heat
Market experts say large banks, especially in the private sector, and some foreign banks could feel the heat of the RBI’s latest move as they have trading desks to exclusively arbitrage between the domestic deliverable and NDF market. According to reports the cumulative NOOP of these banks could be around $40 billion.
Since the Net Overnight Open Position Limit (NOOPL) is set at 25 per cent (ceiling) of the total capital (Tier I and Tier II capital) of the authorised dealer, the aforementioned banks could suffer losses as they have to unwind their positions in the domestic and NDF markets even as they face the prospect of the RBI intervening in both the markets Monday.
RBI said authorised dealers have to ensure compliance with its directions on NOP-INR at the earliest but no later than April 10, 2026, according to the central bank.
Published on March 30, 2026