RBI Curbs on Forex Positions Temporary, Says Governor Sanjay Malhotra
The Reserve Bank of India (RBI) has clarified that its recent restrictions on lenders’ position limits and participation in non-deliverable forwards (NDFs) are temporary measures aimed at stabilizing the rupee. Governor Sanjay Malhotra stated during a post-monetary policy briefing that the curbs were introduced in response to heightened volatility observed in the foreign exchange market in recent weeks.
Malhotra noted that the central bank had identified growing positions by banks, including arbitrage trades between onshore deliverable markets and offshore NDF markets, as a contributing factor to the volatility. While such linkages generally support efficient price discovery under normal conditions, excessive build-up of positions can distort market stability, prompting regulatory intervention.
Reassuring markets, the RBI emphasized that these measures do not indicate any structural shift in policy. Instead, they are targeted responses to specific market conditions. The central bank reiterated its commitment to deepening forex markets and advancing the internationalisation of the rupee, with Malhotra affirming that the current restrictions “will not remain in place forever.”
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