With the Reserve Bank of India’s April 10 deadline for capping banks’ end-of-day net open position (NOP) in the rupee at $100 million ending on Friday, forex market experts expect increased volatility in the currency as the additional dollar supply dries up.
The rupee—which lost 9.9% in FY26—came under intense pressure amid a sharp spike in crude prices following the conflict involving Iran in March. In that month alone, it fell nearly 5% and breached the 95-per-dollar mark. To stem the slide, the RBI on March 27 cracked down on speculative positions by capping banks’ net open positions in the forex market at $100 million by the end of each day, effective April 10. At the time, banks held nearly $40 billion in such open positions. Requests by banks for more time were declined by the regulator.
As this measure did not yield the desired results, the RBI took stricter action on April 1, intervening heavily in both the non-deliverable forwards (NDF) and deliverable markets. It barred banks and dealers from rebooking cancelled trades, which helped stabilise the rupee. The currency then rallied 1.9% in a single day—its best performance since 2013—and has since gained about 2.7%.
According to Jefferies, banks collectively held around $40 billion in open rupee positions before the RBI’s intervention. Even a Re 1 adverse move during unwinding could have resulted in losses of about Rs 4,000 crore in the March quarter. The brokerage noted that while public sector banks had exposure within the permissible 25% of equity capital, private sector banks had exposures averaging over 125%, and foreign banks had exposures running into several multiples.
“An estimated 80–85% of the open positions have already been unwound by Thursday, which means the bulk of this supportive flow is now behind us. In simple terms, the cushion that held the rupee steady is beginning to thin—so brace for more volatility,” said Amit Pabari, managing director at CR Forex Advisors.
Pabari added that with most of the NOP-related support fading and global uncertainties still elevated, the scope for further appreciation appears limited. “The rupee is likely to find a base in the 92.20–92.50 zone, with a gradual move towards 93.50–94.00 levels,” he said.
Sajal Gupta, head of forex and commodities at Nuvama, also expects heightened volatility as the additional dollar supply tap shuts with the RBI deadline.
A trader, requesting anonymity, said banks had reduced exposures by 90–95% system-wide by Thursday, with only a few billion dollars of the estimated $40 billion left to be unwound to meet the deadline. “The urgency is evident from the fact that banks’ request for an extension of at least 30 days was not heeded by the regulator,” the trader added.