Rupee Strengthens to 93.51 as RBI Forces $40B Unwind
The Indian Rupee executed its most significant single-day recovery in over two years after the Reserve Bank of India intervened to curb currency speculation. On Monday, the currency appreciated 130 paise to 93.51 per U.S. dollar, reversing sharply from a record closing low of 94.81 set the previous Friday. The move followed a directive from the RBI on March 27, which slashes the net open position (NOP) limit for banks to a uniform $100 million, with a compliance deadline of April 10, 2026.
This regulatory action forces lenders to unwind an estimated $30 billion to $40 billion in excess dollar holdings. Previously, banks could maintain unhedged positions of up to 25% of their Tier-1 capital, which for major institutions translated into holdings exceeding $1.5 billion each. The RBI's objective is to dismantle a persistent arbitrage trade where banks bought dollars in the local onshore market and sold them at a premium offshore in the non-deliverable forward (NDF) market, a practice that exerted downward pressure on the Rupee as it neared the 95-per-dollar level.
Bank Stocks Tumble on ₹4,000 Crore Projected Treasury Loss
The RBI's currency defense inflicted significant pain on the banking sector, whose treasury operations profited from the now-restricted arbitrage. The Nifty Bank index dropped 2.62%, with all 14 of its constituent stocks trading in the red and reversing gains from the prior two sessions. The sell-off reflects investor pricing-in a projected one-time treasury income loss of approximately ₹4,000 crore ($430 million) for the quarter.
Specific lenders with substantial treasury and forex operations saw sharp declines. Axis Bank fell 3.4%, Kotak Mahindra Bank shed 3.1%, and IndusInd Bank dropped 2.8%. Other notable losers included AU Small Finance Bank, which declined around 2.5% to Rs 860.2. The forced liquidation of long-dollar positions at unfavorable rates is the direct cause of the anticipated mark-to-market losses.
Edgen Stock·Mar 30 2026, 05:56