India Trading Ban Rocks $149 Billion-a-Day Offshore Rupee Market

India’s central bank imposed a sudden ban on domestic banks from facilitating non-deliverable forwards (NDFs), the dominant offshore instrument for trading the rupee, disrupting a $149 billion daily market. The move targets speculative pressure on the rupee, which has faced persistent depreciation amid global economic volatility and capital outflows, forcing authorities to intervene aggressively. Offshore traders, including hedge funds and multinational corporations, rely on NDFs to hedge currency risk; the ban cuts their access to Indian banks, potentially shifting liquidity to less regulated venues. Analysts warn the restriction could backfire by increasing volatility, as market participants seek alternatives like peer-to-peer trading or synthetic derivatives to bypass the constraints. The ban, effective immediately in April 2026, marks India’s most drastic currency defense since 2013, signaling escalating concerns over the rupee’s stability and foreign exchange reserves.