Winning Bizness Desk
Mumbai.The Reserve Bank of India has directed banks to limit their daily dollar holdings to 100 million, aiming to arrest the sharp fall in the rupee. The move comes after the Indian currency hit a record low of 94.59 against the US dollar, triggering concerns over market volatility and rising import costs.
Decision aimed at stabilising falling rupee
Under the new directive, banks can no longer hold excess dollars beyond the specified cap by the end of each trading day. Earlier, banks were maintaining positions ranging between 300 to 500 million dollars. The central bank believes that forcing banks to offload surplus dollars into the market will support the rupee and improve liquidity conditions.
Impact on imports and daily expenses
A stronger rupee could ease pressure on imported goods and services, offering relief to consumers and businesses.
- Imported electronics like mobile phones and laptops may become cheaper
- Foreign travel and overseas education could cost less
- Lower dollar demand may stabilise fuel and energy prices
Experts say the move may bring short-term stability, especially during volatile trading sessions.
Rules on net open positions tightened
The RBI has specifically capped the net open position in rupee terms at 100 million dollars in the onshore deliverable market. This refers to unhedged foreign currency exposure that banks carry.
- Earlier, banks could set limits up to 25 percent of their capital
- Now, a fixed cap replaces the flexible system
- Banks must comply with the rule by April 10
According to HDFC Securities analyst Dilip Parmar, the step will reduce speculative long dollar positions and limit sharp intraday swings in the rupee.
Rupee under pressure amid global tensions
The Indian currency has been under sustained pressure due to foreign fund outflows and rising global uncertainties. In the last ten trading sessions, the rupee has hit record lows five times, reflecting persistent weakness.
- Rupee is nearing the 95 per dollar mark
- Foreign investors continue to pull out funds
- Brokerage firm Bernstein warns rupee could weaken further to 98
Global factors driving currency weakness
The ongoing conflict involving the United States, Israel and Iran, along with rising crude oil prices, has significantly impacted the rupee. Since the outbreak of tensions in West Asia, the currency has depreciated by nearly 4 percent.
- Higher crude prices increase India’s import bill
- Supply disruptions affect LPG and petrochemical products
- Expensive dollar raises risk of inflation in India
This marks one of the steepest annual declines in the rupee since 2011-12, when the eurozone crisis had triggered a sharp fall. In the current financial year alone, the rupee has already weakened by around 10 percent, raising concerns over inflation and economic stability.
