--- title: "India Forex Regulator Criticizes Banks’ Rupee Arbitrage Trades" type: "News" locale: "en" url: "https://longbridge.com/en/news/282440847.md" description: "A senior Reserve Bank of India official criticized banks for exacerbating the rupee's weakness amid Middle East tensions. At a foreign exchange conference in Paris, the Deputy Governor highlighted how arbitrage between local and offshore markets strained dollar liquidity during significant foreign outflows. The RBI recently imposed restrictions on banks' speculative currency bets, forcing them to reverse $30 billion in arbitrage trades. The RBI's measures aim to stabilize the rupee, which has gained about 2% since the clampdown, becoming Asia's best-performing currency this year." datetime: "2026-04-12T09:30:52.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/282440847.md) - [en](https://longbridge.com/en/news/282440847.md) - [zh-HK](https://longbridge.com/zh-HK/news/282440847.md) --- # India Forex Regulator Criticizes Banks’ Rupee Arbitrage Trades A senior Reserve Bank of India official criticized foreign-exchange market makers for their role in aggravating the rupee’s weakness during the Middle East tensions, as the regulator keeps up its tough messaging stance in its defense of the currency. Addressing an annual foreign exchange dealers’ conference in Paris at the weekend, Deputy Governor said the arbitrage between local and offshore markets strained dollar liquidity at a time when the rupee was under pressure due to large foreign outflows, according to people familiar with the matter. They asked not to be identified as they are not authorized to speak to the media. The central bank did not respond to an email seeking comment outside of regular business hours. Sankar did not reply to a text message seeking comment. Sankar’s comments came two weeks after the RBI clamped down on speculation against the rupee by currency bets by banks at $100 million each and barring them from entering derivative contracts in the offshore market. The restrictions forced banks to reverse around $30 billion worth of arbitrage trades under which they had bought dollars in the local market and sold them offshore. In his speech, Sankar signaled the regulator’s displeasure at banks arbitrage trades from their books to corporate clients even though companies are not allowed to undertake such transactions, the people said. The RBI also disapproved of certain other ways in which banks took the trades off their books to reduce their exposure, the people cited Sankar as saying at the conference in Paris. Last week, RBI Governor said arbitrage positions had been building between offshore and local markets toward the end of March. While these linkages were important for efficient price discovery in normal times, excessive volatility and a rapid build-up of positions could be destabilizing, he said. He added the currency market curbs aimed at quelling speculation against the rupee were temporary and would not remain in place forever. Since the RBI first clamped down to support the battered rupee, which had hit record lows and was staring at the 100 per dollar mark, the local currency has gained around 2%. It has become the best performer in Asia this year as banks unwound bearish rupee bets to comply with an April 10 deadline. ### Related Stocks - [EPI.US](https://longbridge.com/en/quote/EPI.US.md) - [PIN.US](https://longbridge.com/en/quote/PIN.US.md) - [INDY.US](https://longbridge.com/en/quote/INDY.US.md) - [INDA.US](https://longbridge.com/en/quote/INDA.US.md) - [IND.US](https://longbridge.com/en/quote/IND.US.md) - [INDH.US](https://longbridge.com/en/quote/INDH.US.md) - [USDU.US](https://longbridge.com/en/quote/USDU.US.md) ## Related News & Research - [India’s Renewable Surge Cut Fossil Fuel Power Use in 2025](https://longbridge.com/en/news/284196549.md) - [India turns net exporter of finished steel in 2025/26, data shows](https://longbridge.com/en/news/284324889.md) - [India's MobiKwik gets central bank nod for non-banking financial company licence](https://longbridge.com/en/news/284173863.md) - [Key facts: Coal India Q4 profit ₹108.39bn; 750MWh battery, ₹3,300cr for washeries](https://longbridge.com/en/news/284313788.md) - [India wheat output likely to fall, missing forecast as rain, hail cut yields](https://longbridge.com/en/news/283940163.md)