New Delhi, March 31 -- The defence of the rupee has entered a crucial stage, with the central bank virtually forcing commercial banks to share the burden as it guards the country's forex trove.

Banks often buy dollars cheaply in India and sell them at a premium abroad, keeping risks balanced on paper while profiting from the difference. On Friday, the Reserve Bank of India capped banks' net open positions in the domestic market at $100 million, essentially forcing them to unwind trades, potentially leading to losses. The new rule, which takes effect on 10 April, is a departure from the earlier system that allowed exposures up to 25% of capital after balancing offshore and onshore trades.

"If a bank has sold $500 million offshore and bou...