New Delhi: Indian banks suffered nearly $500 million in foreign exchange trading losses during the first half of 2026 after Reserve Bank of India rules forced them to reduce currency positions, according to Crisil Coalition Greenwich.
Lenders subsequently recovered around $400 million as trading conditions adjusted and positions returned to normal, the report said.
RBI Forex Position Cap Triggers Losses
The losses followed the RBI’s March 27 directive limiting authorised dealer banks’ end-of-day net open rupee positions in the domestic market to $100 million.
Banks had until April 10 to bring their positions within the limit. The short deadline required lenders to quickly close or rebalance trades, putting pressure on their foreign exchange trading books.
The adjustment coincided with sharp rupee movements, foreign investor withdrawals and strong corporate demand for protection against currency fluctuations.
Tight Deadline Adds Trading Pressure
Nitin Agicha, vice-president for Market Structure and Technology at Crisil Coalition Greenwich, said the brief implementation period forced banks to adjust positions during difficult market conditions.
The tighter cap reduced lenders’ capacity to hold currency risk and support trading activity. Restrictions on derivatives involving related parties also made it harder for some banks to balance their exposures.
Together, these changes increased the challenges of managing foreign exchange risks while meeting customer demand.
Wider Spreads Help Banks Recover
Banks recovered much of their initial losses after the gap between currency buying and selling prices widened.
Dealers adjusted prices to reflect reduced trading capacity and greater risks when completing transactions, according to the report.
In April, the RBI withdrew some earlier instructions and permitted limited exceptions for related-party transactions, easing operational pressure.
Oil Prices Keep Rupee Risks Elevated
The report identified higher crude oil prices as another source of currency volatility because India relies heavily on imported energy.
India imports about 85 per cent of its crude oil and 50 per cent of its natural gas, leaving its economy exposed to rising energy costs.
