RBI Partially Eases Rupee Curbs For Banks, Allows Related-Party Hedging Under $100 Million Limit

The Reserve Bank of India (RBI) on April 20 withdrew some of the restrictions placed on rupee derivative trading earlier this month. The RBI has allowed banks to continue certain related-party hedging transactions and clarified that they will not be traded as speculative trades, as per the circular.

The RBI has put restrictions in an aim to curb the sharp depreciation in the rupee to record lows. The RBI had on April 1 banned banks from offering non-deliverable forwards to clients, along with barring companies from rebooking their forward contracts. This was among the several actions taken by the central bank to clamp down on arbitrage trades, which were thought to increase the volatility in the rupee. The RBI had also banned authorised dealer banks from entering into forex derivative trades with related parties and put a cap of $100 million on their net open forward rupee positions from April 10.

In the revised circular to banks, the RBI allowed banks to continue rebooking hedging transactions, including across their overseas branches. These arbitrage trades have been allowed by RBI as long as they are genuine trades for offsetting risks and not just speculative trades, it said. However, the overall limit on net open rupee positions for banks remains unchanged at $100 million.

Banks can also retain existing forex positions within the $100 million limit until maturity, or modify them if needed. This removes the need for banks to unwind their trades prematurely to adhere to the cap on net positions. The RBI kept the cap on net open positions or the net unhedged positions for banks intact to curb speculative trades, while not disadvantaging banks from incurring losses due to premature unwinding.

The relief marks the partial rollback of stringent measures taken by the central bank to arrest the rupee’s slide past the record low of 95 against the US dollar in late March amid surging crude oil prices due to the Iran war. The rupee has slid more than 10 per cent over the past year, with around 5 per cent decline seen in 2026 alone. The rupee has remained Asia’s worst-performing currency.

RBI’s measures to curb speculative trades, along with its persistent interventions in the forex market, have helped dollar sales, which have helped the rupee trace back some of its losses this month. The rupee is currently trading at 93.47 against the dollar, 35 paisa lower than the previous close. Meanwhile, Brent crude oil futures are trading over 1 per cent lower from the previous session at $94.43 per barrel amid hopes of a second round of US-Iran peace negotiations.