Mumbai, Aug. 20 -- Mumbai: India's foreign exchange markets should not fear integration with global liquidity but work to strengthen risk management and oversight, according to Reserve Bank of India (RBI) deputy governor Rohit Jain.

Citing the recent central bank crackdown on forex positions in offshore markets, Jain said a build-up of "unhealthy arbitrage positions" linking the onshore deliverable and offshore non-deliverable forward (NDF) markets in late March and early April this year prompted calibrated measures.

Amid sustained pressure on the Indian rupee, the RBI introduced a $100 million cap on net open positions in the onshore market on 27 March. On 1 April, it barred banks from offering rupee-linked NDFs, noting exploitation by...