Banks will be forced to unwind their long dollar positions in the domestic forex market following a late-Friday directive from the Reserve Bank of India (RBI), a move that could push the Rupee up by as much as 100 paise against the US Dollar when markets open on Monday.
The RBI’s March 27 direction mandates that authorised dealers keep their Net Open Position–Indian Rupee (NOP-INR) in the onshore deliverable market within $100 million at the end of each business day, effectively curbing large long-dollar bets that have been adding to pressure on the domestic currency.
The move comes after the Rupee has weakened around 4 per cent since the onset of the West Asia conflict on February 28, 2026, and is aimed at tempering volatility by reducing speculative positioning. This is the first such directive from the central bank in around 15 years.
K Arvind, Head – Treasury at Tamilnad Mercantile Bank, said banks’ long dollar positions had been adding to demand for the US currency, and the RBI’s cap would force them to pare these exposures. “Banks will have to exit long positions in the domestic deliverable market, which will also lead to a reduction in their short positions in the non-deliverable forward (NDF) market,” he said, adding that the Rupee could open nearly 100 paise stronger and settle below the 94/$ level on Monday.
Market experts say large banks, especially in the private sector, and some foreign banks could feel the heat of the RBI’s latest move as they have trading desks to exclusively arbitrage between the domestic deliverable and NDF market. According to market estimates the cumulative NOOP of these Banks could be around $40 billion.
Since the Net Overnight Open Position Limit (NOOPL) is set at 25 per cent (ceiling) of the total capital (Tier I and Tier II capital) of the Authorised Dealer, the aforementioned banks could suffer losses as they not only have to unwind their positions in the domestic and NDF markets even as they face the prospect of the RBI intervening in both the markets Monday.
RBI said Authorised Dealers have to ensure compliance with its directions on NOP-INR at the earliest but no later than April 10, 2026.
The Rupee closed at a new low of 94.8125 per US Dollar, down about 84 paise against previous close of 93.9775. The raging war in West Asia continues to have a deleterious effect on the Rupee amid rising global crude oil prices, continuous FPI-related outflows from the equity markets and a strengthening Dollar.
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