--- title: "RBI DG T Rabi Sankar criticises banks' arbitrage trades as rupee weakens" type: "News" locale: "en" url: "https://longbridge.com/en/news/282441501.md" description: "RBI Deputy Governor T. Rabi Sankar criticized banks for exacerbating the rupee's weakness through arbitrage trades during West Asia tensions. He highlighted that these trades strained dollar liquidity amid significant foreign outflows. Following RBI's restrictions on currency speculation, banks reversed $30 billion in trades. Sankar expressed discontent over banks transferring trades to corporate clients, which is prohibited. RBI Governor Sanjay Malhotra noted that while arbitrage positions are crucial for price discovery, excessive volatility can be destabilizing. The rupee has gained 2% since the RBI's intervention, becoming Asia's best-performing currency this year." datetime: "2026-04-12T01:51:54.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/282441501.md) - [en](https://longbridge.com/en/news/282441501.md) - [zh-HK](https://longbridge.com/zh-HK/news/282441501.md) --- # RBI DG T Rabi Sankar criticises banks' arbitrage trades as rupee weakens _**By Pratigya Vajpayee and Siddhi Nayak**_ A senior Reserve Bank of India official criticized foreign-exchange market makers for their role in aggravating the rupee’s weakness during the West Asia 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 T. Rabi Sankar 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 capping 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 transferring 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 Sanjay Malhotra 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 - [IMVP.US](https://longbridge.com/en/quote/IMVP.US.md) - [IND.US](https://longbridge.com/en/quote/IND.US.md) ## Related News & Research - [INDIA RUPEE-Rupee hits record closing low hurt by surging oil, persistent outflows](https://longbridge.com/en/news/284542442.md) - [The Indian Rupee extends the losses amid US-Iran stalemate with record lows in sight](https://longbridge.com/en/news/284544563.md) - [India's MobiKwik gets central bank nod for non-banking financial company licence](https://longbridge.com/en/news/284173863.md) - [India's IndusInd Bank beats profit view on fewer new bad loans](https://longbridge.com/en/news/284142777.md) - [India turns net exporter of finished steel in 2025/26, data shows](https://longbridge.com/en/news/284324889.md)