During an annual foreign exchange dealers' conference in Paris, T. Rabi Sankar (Deputy Governor of the Reserve Bank of India) criticized banks for their arbitrage trades, which he claimed worsened the rupee's weakness amid tensions in West Asia. He noted that these trades strained dollar liquidity as the rupee faced pressure from significant foreign outflows. The RBI recently imposed restrictions, capping currency bets by banks at $100 million and prohibiting them from entering derivative contracts in offshore markets. This move forced banks to reverse approximately $30 billion in arbitrage trades. Despite the challenges, the rupee has gained around 2% since the RBI's intervention, becoming the best-performing currency in Asia this year. Sankar also expressed concerns about banks transferring arbitrage trades to corporate clients, which is against regulations. RBI Governor Sanjay Malhotra added that while linkages between local and offshore markets are crucial for efficient price discovery, excessive volatility can destabilize the market.