In a significant move to stabilize the Indian rupee, banks have exited the majority of their arbitrage trades, complying with the Reserve Bank of India's (RBI) directive to limit net open positions in the onshore market to $100 million by April 10. This decision follows the RBI's observation of increased volatility in the foreign exchange market, attributed to these arbitrage activities. Estimates suggested that banks held around $40 billion in such positions before the measures were implemented. As banks began unwinding their trades, the rupee slipped 0.2% to 92.77 per dollar, marking a halt to its four-day rise, while one-year forward premiums rose 12 basis points to 3.12%. Data indicated that banks executed nearly $36 billion in non-deliverable forward (NDF) trades from April 1 to April 7, primarily reflecting position unwinding rather than client-related activity. The RBI's actions aim to mitigate the currency's downward pressure and curb market volatility.