In a move to stabilize the Indian rupee, banks have exited most of their arbitrage positions following a directive from the Reserve Bank of India (RBI) issued on March 27. The RBI mandated that banks limit their net open positions in the onshore market to $100 million, with compliance required by April 10. This decision was made to curb the volatility and downward pressure on the rupee, which has been experiencing increased price swings recently, as noted by RBI chief Sanjay Malhotra. Estimates suggest that the total arbitrage positions were around $40 billion when the measures were introduced. As of now, most positions have been unwound, with no extensions likely for banks. Recent market activity indicates that the rupee weakened by 0.2% to 92.77 per dollar, while one-year forward premiums rose by 12 basis points to 3.12%. Data from the clearing house CCIL revealed that banks executed nearly $36 billion in non-deliverable forward trades from April 1 to April 7, primarily reflecting position unwinding rather than client-related activity.