The Reserve Bank of India has taken strong steps to control speculation against the falling rupee.
In its latest move, the RBI has restricted certain foreign exchange (forex) derivative transactions, especially those used for betting on currency movements.
This comes as the rupee continues to weaken sharply in recent weeks.
What Has RBI Banned?
The RBI has stopped banks from offering non-deliverable forward (NDF) contracts in the rupee.
This applies to both:
Indian (resident) clients
Foreign (non-resident) clients
In simple terms, companies and traders can no longer use these contracts to speculate on the rupee’s future value.
However, banks can still offer regular (deliverable) forex contracts, but only for genuine business needs like hedging.
Why RBI Took This Step
The main reason is the sharp fall in the rupee.
The rupee has dropped over 4% in one month
It has fallen nearly 11% this financial year
Recently, it hit a record low of 94.83 per US dollar
Global tensions, especially in West Asia, have added pressure on the currency.
The RBI wants to reduce speculation and stabilise the market.
More Restrictions to Stop Loopholes
The central bank has also closed some common loopholes:
No rebooking of forex contracts once cancelled
Banks cannot enter deals with related parties
Lenders must verify transactions and ensure compliance
These steps aim to stop traders from timing the market or bypassing rules.
Earlier Rule: Limits on Banks’ Positions
This move comes shortly after another restriction by the RBI.
Banks were told to limit their net open position (NOP) in the rupee to $100 million per day.
This rule will take full effect by April 10, 2026.
What This Means for the Market
The RBI’s actions show a clear strategy:
Reduce speculative trading
Increase transparency
Ensure forex derivatives are used only for risk protection (hedging)
This could help bring more stability to the rupee, though it may limit trading flexibility.
Final Takeaway
With the rupee under pressure, the RBI is tightening rules to control excessive speculation and protect the currency.
These measures may make trading stricter, but they aim to create a more stable and disciplined forex market.
