India's RBI Curbs NDF Arbitrage
Analysis based on 8 articles · First reported Apr 06, 2026 · Last updated Apr 06, 2026
The State Bank of India's regulatory curbs initially led to arbitrage opportunities, causing the India — Indian rupee to fall to an all-time low. Subsequent intensified measures by the State Bank of India, however, helped boost the India — Indian rupee, impacting foreign exchange markets and corporate hedging strategies.
Indian companies' activity in the non-deliverable forwards (NDF) market surged to over $7 billion on March 30, driven by arbitrage opportunities. These opportunities arose after the State Bank of India imposed restrictions on lenders' net onshore open FX positions, leading banks to unwind positions. This created a spread between onshore and NDF markets, which corporates exploited by buying United Statess onshore and selling in NDF. Despite initial regulatory efforts, the India — Indian rupee fell to an all-time low past 95 per United States on March 30 due to onshore corporate dollar demand. Subsequently, the State Bank of India intensified its regulatory crackdown, barring local lenders from offering clients NDF and disallowing companies from rebooking canceled forward contracts. These measures ultimately helped boost the India — Indian rupee, with the currency trading around 93 per United States.
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