Net Open Position in Indian Rupee (NOP-INR)

The Reserve Bank of India has directed banks to limit their Net Open Position in Indian Rupee (NOP-INR) to $100 million per day, to be implemented by April 10, 2026. The move comes amid a falling rupee, rising oil prices, and inflation concerns due to the West Asia conflict.

What is NOP-INR?

NOP-INR refers to the Net Open Position in Indian Rupees, which measures a bank’s unhedged exposure to foreign exchange fluctuations.
It indicates the difference between foreign currency assets and liabilities held by banks.

Earlier Norms vs New Rule

Earlier, banks could set their NOP limits up to 25% of their total capital, subject to board approval.
The new cap of $100 million is significantly stricter and reduces banks’ ability to take large positions.

Reason Behind RBI’s Move

The RBI aims to stabilise the rupee and curb excessive volatility in the forex market.
It also seeks to protect foreign exchange reserves, which have declined amid global uncertainty.

How It Works

Banks often maintain large foreign exchange books with both hedged and unhedged positions.
Large unhedged positions can lead to intraday volatility and sharp currency swings, which this measure intends to control.

Shift in RBI Strategy

The RBI has shifted from direct intervention (selling dollars) to regulatory tightening (limiting positions).
This helps preserve its forex reserves or “war chest”.

Past Precedent

In December 2011, the RBI had similarly reduced banks’ open positions by up to 75%.
Those measures helped the rupee recover after a prolonged decline.

Sources: ET, TH