Daijiworld Media Network - New Delhi
New Delhi, Oct 2: Indian banks suffered nearly $500 million in market losses on their foreign exchange trading books in the first half of 2026 after regulatory changes by the Reserve Bank of India (RBI) forced lenders to unwind positions, according to a report by Crisil Coalition Greenwich.
The banks subsequently recovered around $400 million of those losses as market spreads widened and positions were normalised, the research showed.
The losses followed the RBI’s March 27 directive capping authorised dealer banks’ end-of-day onshore rupee net open positions at $100 million.
Banks were required to unwind their positions by April 10, resulting in a sharp adjustment to their trading books.
The changes came at a time when the rupee was volatile, foreign investors were withdrawing funds from Indian markets and corporate demand for currency hedging was high.
“The short implementation window for the new RBI rules forced banks to unwind or rebalance positions quickly at a time of elevated rupee volatility, foreign-investor outflows and heavy corporate hedging demand,” said Nitin Agicha, Vice-President, Market Structure & Technology at Crisil Coalition Greenwich.
The report said the tighter limits also reduced banks’ ability to warehouse foreign exchange risk and provide liquidity. Restrictions on related-party derivatives further limited the ability of some banks to offset their exposures.
Banks recovered part of their initial losses after market spreads widened as dealers priced in tighter balance-sheet capacity and higher execution risks, the report said.
In April, the central bank withdrew some of its earlier instructions and allowed limited exceptions for related-party transactions, easing some operational pressure on banks.
The report also identified higher crude oil prices as a key source of foreign exchange volatility, given India’s dependence on imported energy.
It noted that India imports about 85 per cent of its crude oil and 50 per cent of its natural gas.
India’s import bill rose 20 per cent between January and July 2026, while total imports reached $95.9 billion, the highest level since 2011, according to the research.