Banking stocks declined on Monday after the Reserve Bank of India’s (RBI) latest measures to support the falling rupee against the US dollar. The Bank Nifty index dropped over 2% in early trade, with all its constituents trading with heavy losses.
Axis Bank, IndusInd Bank, Kotak Mahindra Bank, IDFC First Bank and Yes Bank were the top losers on the index, falling over 2-3%.
The RBI on Friday directed banks to cap their net open rupee (NOP-INR) positions in the foreign exchange market at $100 million at the end of each business day. Banks have been asked to comply with this directive at the earliest, but no later than April 10, 2026.
“…it has now been decided that Authorised Dealers shall ensure that their NOP-INR positions in the onshore deliverable market shall be maintained within US$ 100 million at the end of each business day. Authorised Dealers shall ensure compliance with the above at the earliest but no later than April 10, 2026,” RBI said in a circular on March 27.
The RBI’s direction is expected to trigger significant unwinding of positions by banks in both the onshore and offshore markets.
Banks usually hold sizeable open positions in the onshore market, which are largely offset by positions in the offshore non-deliverable forwards (NDF) market.
With the new cap in place, banks will need to sharply reduce their onshore exposures, leading to large-scale unwinding in both onshore and offshore markets.
(More to come)