How RBI curbs are disrupting the $149 billion-a-day offshore rupee market
The RBI has barred Indian banks from offering non-deliverable forward (NDF) contracts to clients offshore, a key instrument widely used to trade the rupee outside India.
- Apr 2, 2026,
- Updated Apr 2, 2026 3:28 PM IST
The Reserve Bank of India's (RBI) latest curbs on offshore rupee trading are set to disrupt a $149 billion-a-day market, as the central bank moves aggressively to stabilise the weakening domestic currency, according to a Bloomberg report.
The RBI has barred Indian banks from offering non-deliverable forward (NDF) contracts to clients offshore, a key instrument widely used to trade the rupee outside India. NDFs are financial derivatives used to hedge or speculate on currency exchange rates. These contracts are typically settled in cash, unlike traditional forward contracts, where the actual currencies are exchanged upon maturity.
The move affects major currency hubs such as Singapore and London, where offshore trading volumes have grown to nearly twice the size of the onshore market over the past decade, Bloomberg noted.
The restrictions come alongside a cap of $100 million on lenders' daily currency positions, prompting banks to unwind an estimated $30 billion worth of arbitrage trades, Bloomberg's report noted. These trades typically involve buying dollars onshore and selling them offshore to profit from price differences, a practice that can add pressure on the rupee when bearish bets increase.
The Reserve Bank's actions triggered a sharp rebound in the currency, with the rupee rising above 93 per dollar on Thursday after recently weakening past 95 level.
The currency has fallen nearly 8 per cent over the past year, making it Asia's worst performer, amid higher crude oil prices linked to the Iran conflict and a widening trade deficit.
Meanwhile, the rupee's recovery helped Indian benchmark indices settle on a positive note, recovering from a sharp intraday fall.
The Reserve Bank of India's (RBI) latest curbs on offshore rupee trading are set to disrupt a $149 billion-a-day market, as the central bank moves aggressively to stabilise the weakening domestic currency, according to a Bloomberg report.
The RBI has barred Indian banks from offering non-deliverable forward (NDF) contracts to clients offshore, a key instrument widely used to trade the rupee outside India. NDFs are financial derivatives used to hedge or speculate on currency exchange rates. These contracts are typically settled in cash, unlike traditional forward contracts, where the actual currencies are exchanged upon maturity.
The move affects major currency hubs such as Singapore and London, where offshore trading volumes have grown to nearly twice the size of the onshore market over the past decade, Bloomberg noted.
The restrictions come alongside a cap of $100 million on lenders' daily currency positions, prompting banks to unwind an estimated $30 billion worth of arbitrage trades, Bloomberg's report noted. These trades typically involve buying dollars onshore and selling them offshore to profit from price differences, a practice that can add pressure on the rupee when bearish bets increase.
The Reserve Bank's actions triggered a sharp rebound in the currency, with the rupee rising above 93 per dollar on Thursday after recently weakening past 95 level.
The currency has fallen nearly 8 per cent over the past year, making it Asia's worst performer, amid higher crude oil prices linked to the Iran conflict and a widening trade deficit.
Meanwhile, the rupee's recovery helped Indian benchmark indices settle on a positive note, recovering from a sharp intraday fall.