Axis, Kotak Shares Decline as RBI Sets Rupee Position Limits, Bank Nifty Plunges Over 2%

Banking Stocks Decline as RBI Introduces New Measures to Support Rupee

• Bank Nifty index fell over 2% in early trade on Monday, with all its constituents trading with heavy losses.
• The top losers on the index were Axis Bank, IndusInd Bank, Kotak Mahindra Bank, IDFC First Bank, and Yes Bank, which fell over 2-3%.

RBI Measures to Support Rupee

The Reserve Bank of India (RBI) has introduced new measures to support the falling rupee against the US dollar. On Friday, the RBI directed banks to cap their net open rupee (NOP-INR) positions in the foreign exchange market at $100 million at the end of each business day. Banks have been asked to comply with this directive at the earliest, but no later than April 10, 2026.

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Impact on Banking Stocks

The tighter cap applies specifically to the onshore market, forcing banks to adjust their positions and likely sell dollars in the market, which can temporarily support the rupee. This move is expected to force the unwinding of arbitrage positions estimated at $10–18 billion. The RBI's intervention to curb NDF arbitrage trade by putting a daily cap on onshore open trade reflects mounting pressure on the rupee, which is threatening to breach 95 to a dollar.

Industry Estimates

Industry estimates of aggregate excess positions range from $10–18 billion (arbitrage bets) to ~$40 billion total outstanding bets. According to Systematix, many banks are estimated to be long USD (short INR) in proprietary/arbitrage books. Forced selling of dollars/buying of rupees could crystallise losses for banks with large treasury and FX desks, such as State Bank of India, HDFC Bank, ICICI Bank, and Axis Bank.

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