The Reserve Bank of India (RBI) has eased some rules on Non-Deliverable Forwards (NDFs). It now allows authorised dealers to offer NDFs, roll over and cancel related-party contracts, and use back-to-back hedging.
USD/INR rose 0.2% to 93.12 after the change. Over the past three weeks, USD/INR has traded in a 92.40–93.40 range.
The RBI Governor Sanjay Malhotra said at the 8 April monetary policy meeting that curbs on FX derivatives are not permanent. The Indian rupee remains the weakest Asian currency year-to-date.
The article was produced with the help of an Artificial Intelligence tool and reviewed by an editor.
The Reserve Bank of India is opening up the Non-Deliverable Forward market again, which means more liquidity and easier access for us. Given the rupee’s recent stability, the RBI seems less worried about sudden price swings. This move will likely draw more participants into the INR derivatives space in the near term.
We are seeing this happen even as the rupee remains weak, having depreciated over 3% against the dollar since the start of the year. Recent data shows foreign portfolio investors were net sellers of $2.1 billion in Indian equities so far in April, adding to the pressure. However, with India’s Q1 GDP growth coming in at a strong 7.2%, the underlying economic story provides some support.
This policy shift is a significant change from the situation we saw in late 2025, when sharp currency depreciation prompted the RBI to implement these very restrictions. The central bank’s willingness to now roll them back suggests a preference for market-based mechanisms as long as the 92.40-93.40 range for USD/INR holds. We should expect the RBI to defend this band to maintain its credibility.
For traders, this signals that selling volatility could become a more attractive strategy. With the central bank implicitly backing a stable range, option premiums may decline. We should consider strategies like short straddles on USD/INR, positioning for the currency to remain within its recent channel over the next few weeks.
The relaxed rules also make carry trades more feasible by simplifying the hedging process. India’s repo rate at 6.5% offers a notable yield advantage over the US Fed Funds rate of 4.75%. Increased liquidity should also lead to tighter bid-ask spreads, reducing the cost of entry and exit for these positions.
Still, we must remain aware of the broader market trend of US dollar strength. Persistent inflation in the United States continues to be the main driver, and any unexpected hawkish signals from the Federal Reserve could challenge the RBI’s new comfort zone. This external factor remains the primary risk to a stable rupee.
