Indian banks incur $500 million FX hit after RBI caps rupee positions
Indian banks recorded nearly $500 million in mark-to-market FX losses in early 2026 after the RBI forced them to unwind positions, and later recouped about $400 million as spreads widened.
Crisil Coalition Greenwich reported that Indian banks suffered almost $500 million in mark-to-market foreign-exchange losses during the first half of 2026 after the Reserve Bank of India imposed a cap on authorised dealers’ end-of-day on-shore rupee net open positions at $100 million. Banks were required to unwind these positions by April 10, a move that coincided with sharp rupee swings, capital outflows and heavy corporate demand for currency hedging.
The subsequent widening of market spreads helped banks claw back roughly $400 million of the initial hit. On April 20 the RBI relaxed part of the directive, allowing limited related-party transactions and easing operational strain. Analysts linked the volatility partly to rising crude-oil prices, noting India’s heavy reliance on imported energy and a 20 percent rise in the import bill between January and July 2026.
Why it matters
The episode shows how regulatory limits can quickly affect bank balance sheets and liquidity in a volatile currency market.
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