RBI scrutinises how banks unwound Rupee arbitrage, says sources

The Reserve Bank of India (RBI) is scrutinising the ‌methods large banks used to unwind their Rupee arbitrage positions, six sources said, ​on concerns the trades may have breached regulations and impeded efforts to ⁠stabilise the currency.

In late March and early April, the RBI effectively forced banks to unwind up to $40 billion in Rupee arbitrage trades between the onshore and non-deliverable forward markets as it sought ‌to shore up a currency that was teetering at record lows due to the Iran war and foreign fund outflows.