RBI Governor Sanjay Malhotra announced on Tuesday that the central bank would tighten rules against speculative bets in the rupee market.
The move comes after a series of interventions launched on October 10, when the rupee slumped to a record low of 96.96 against the dollar on Friday, prompting the RBI to supply dollars directly to three state‑run oil marketing companies and tighten foreign‑exchange derivative rules.
Among the new measures, the RBI introduced a Foreign Exchange Risk Reserve requirement for banks on qualifying transactions, widened bid‑ask spreads in the forwards market and shifted a portion of activity to the non‑deliverable forward market.
In a Moneycontrol interview, Malhotra said, "We observed excessive volatility and one‑sided bets that were preventing market forces from determining the rupee's true value," adding that around one‑third of derivative trades were being cancelled or closed on the day they were entered.
The curbs have already started to take shape, with the rupee outperforming other Asian currencies and speculators pulling back from the forwards market, as bid‑ask spreads widen and the NDF market absorbs more activity.
The RBI will assess the effectiveness of these restrictions at its forthcoming Monetary Policy Committee meeting on Friday, while traders brace for a potential tightening of further controls if volatility remains high.