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The Reserve Bank of India has introduced additional measures to address speculative activity in the rupee market. The move follows earlier steps aimed at banks, which did not fully stabilise the currency. 

With the rupee facing continued pressure due to global developments and market factors, the central bank has now expanded its focus to include corporate transactions in foreign exchange markets.

Fresh Measures Announced by RBI

The RBI has implemented new restrictions on foreign exchange transactions involving the rupee. Banks are no longer permitted to offer rupee non-deliverable forward (NDF) contracts to both resident and non-resident clients.

In addition, companies are now restricted from rebooking forward contracts once they have been cancelled. This step is intended to reduce speculative trading strategies linked to currency movements.

Shift in Focus to Corporate Arbitrage

After earlier actions targeting banks, the central bank has now turned its attention to corporate entities. The latest measures aim to address arbitrage opportunities that emerged when banks adjusted their positions following regulatory limits.

By restricting rebooking and certain derivative transactions, the RBI is seeking to limit indirect speculative exposure in the market.

Earlier Steps and Market Response

Earlier in the week, the RBI had imposed a cap of $100 million on the net open positions of banks in the rupee. However, this measure did not significantly ease pressure on the currency.

Banks reportedly reduced their positions by transferring exposure to corporate participants, which led to continued speculative activity despite the initial restrictions.

Rupee Movement and External Factors

The rupee has been under pressure in recent weeks, influenced by global uncertainties and rising crude oil prices. Concerns related to geopolitical developments, including tensions linked to the Iran region, have also contributed to market volatility.

In March, the currency recorded a decline of over 4%, marking a notable monthly movement in recent years.

Read More: India Restricts Imports of Precious Metal Jewellery; Licence Now Required.

Conclusion

The RBI’s latest measures reflect an effort to broaden regulatory oversight in the foreign exchange market by addressing both banking and corporate activity. While these steps are aimed at reducing speculative pressure, the rupee continues to be influenced by external factors. The effectiveness of these measures will depend on how market participants adjust to the revised framework.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.