In light of the Reserve Bank of India's (RBI) recent restrictions on speculative bets against the Indian rupee, foreign banks are reportedly reclassifying some arbitrage transactions as hedging deals. This strategy comes after the RBI imposed a uniform limit of $100 million on the net open position (NOP) that banks can hold onshore. By presenting these transactions as hedges against capital received from their overseas parent companies, banks aim to navigate the new regulatory landscape while still engaging in profitable arbitrage activities. However, the legitimacy of this approach may face scrutiny from the RBI, which is likely to investigate the timing and nature of these transactions. The non-deliverable forward (NDF) market, which has gained traction since the 1990s, allows foreign investors to bet on the USD-INR exchange rate, further complicating the rupee's valuation. The RBI's crackdown on arbitrage deals is part of its effort to curb liquidity provided to international speculators shorting the rupee. As these developments unfold, the impact on the banking sector and the overall currency market remains to be seen.