RBI eases forex curbs, rolls back offshore derivative restrictions as rupee stabilises

The Reserve Bank of India has started easing some of the restrictions it had imposed on forex dealers in March, a sign that the pressure on the rupee has cooled for the time being.

The move comes days after RBI Governor Sanjay Malhotra made it clear that the curbs were never meant to be permanent. They were introduced to deal with a specific phase of volatility, and with conditions now calmer, the central bank is gradually stepping back.

What changes for the market

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Dealers have now been given more room to operate in the offshore non-deliverable forwards (NDF) market. They can offer rupee-linked derivative contracts to both domestic and overseas clients without the earlier restrictions.

Another important change is that users are now allowed to rebook their forex derivative contracts. For companies and investors who actively manage currency exposure, this makes things a lot more practical and less restrictive.

In simple terms, the RBI has restored some of the flexibility that had briefly disappeared from the market.

But not a free run

Even with the easing, the central bank has not removed all guardrails. Banks are still barred from entering into rupee derivative deals with related parties, except in limited cases such as rollover or cancellation of existing contracts.

There is also no change in the rule that caps banks’ net open positions in the onshore market at $100 million at the end of each day. This ensures that risk-taking does not spiral again.

Why the curbs were needed earlier

The restrictions were brought in at a time when the rupee was under intense pressure. Oil prices had surged, with Brent crude moving past the $100 mark, while tensions around a possible US-Iran conflict were adding to uncertainty.

During that phase, the RBI noticed that speculative trades in the offshore market were building up quickly. These positions were amplifying swings in the currency, pushing it to record lows.

What changed after that

Once the curbs kicked in, banks began unwinding their positions. Rough estimates suggest that around $40 billion worth of trades were reduced in the offshore market.

That had a visible impact. The rupee, which had slipped to an all-time low of 95.21 against the dollar, began to recover as the pressure eased.

A measured approach

The latest move shows that the RBI is not rushing to remove all controls at once. Instead, it is taking a step-by-step approach — restoring normal market functioning, but keeping a close watch on risks.

For market participants, this is a signal that things are moving back to normal, even if cautiously. For the central bank, the message is equally clear: flexibility can return, but not at the cost of stability.

What happens next will depend largely on global factors — especially oil prices and geopolitical developments. For now, though, the RBI seems comfortable enough to loosen its grip, even as it keeps one eye firmly on the market.