Indian banks request three-month window to comply with new FX limits

Yesterday 15:45

Several Indian banks have asked the Reserve Bank of India (RBI) for a three-month period to comply with newly imposed foreign exchange position limits, according to sources familiar with the matter. Banks warn that immediate enforcement could lead to disorderly position unwinding and potential financial losses.

The central bank recently mandated that, starting April 10, banks’ net open rupee positions in the onshore deliverable market must not exceed $100 million at the end of each business day. This decision comes amid rising pressure on the Indian rupee, driven by soaring oil prices and significant foreign portfolio outflows following the conflict involving Iran.

Senior treasury officials from both domestic and foreign banks met with RBI representatives to express concerns that rapid implementation of the rules could force abrupt unwinding of arbitrage trades between the onshore and non-deliverable forward markets. Such a scenario could expose banks to unintended losses.

The RBI has yet to respond publicly to the request, though bankers emphasize that a transitional period would help mitigate market disruption while ensuring compliance with the new regulatory framework.