RBI Curbs Speculation as Rupee Hits Record Lows

The Reserve Bank of India (RBI) launched a series of aggressive regulatory interventions between late March and April 2026 to stabilize the Indian rupee after it hit an all-time low of approximately 95.23 per U.S. dollar. The currency's decline was driven by high crude oil prices, record foreign capital outflows, and geopolitical instability following the outbreak of war in West Asia on February 28, 2026.

To combat speculation and corporate arbitrage, the RBI first capped banks' net open rupee positions at $100 million by April 10. When this failed to stop the decline, the central bank barred banks from offering rupee non-deliverable forwards (NDFs) to all clients and prohibited the rebooking of cancelled foreign exchange derivative contracts. These measures forced banks to unwind an estimated $30 billion to $40 billion in positions, triggering a sharp rebound that saw the rupee gain over 2% to trade around 92.41 to 93.14 by early April.

While the currency recovered, the crackdown sparked a sell-off in Indian bank stocks, with Jefferies estimating potential sector losses between Rs 4,000 crore and Rs 5,000 crore. Governor Sanjay Malhotra characterized the curbs as temporary measures and denied a shift in the bank's broader strategic stance. Market stability remained fragile due to the actions of U.S. President Donald Trump, whose threats to hit Iran "extremely hard" spiked oil prices, though a subsequent ceasefire and peace talks led by Vice President JD Vance in Islamabad provided brief relief to equity markets.