The USD/INR pair opened at 93.5875, compared to Friday's close of 94.8125.

The Reserve Bank of India directed banks on Friday evening to cap their net open overnight foreign exchange positions at no more than $100 million.

Bankers warned that a rush to unwind arbitrage positions could trigger significant dollar selling in the onshore market and spur buying activity in the non-deliverable forward market.

The one-month USD/INR non-deliverable forward points climbed as high as 100 paise, with traders anticipating a decline in onshore forward premiums.

Anxious traders are concerned about the potential impact of disorderly position unwinding. "Today, no one is worried about profits, only about limiting losses," one trader remarked regarding arbitrage positions.

Meanwhile, concerns over escalating Middle East conflicts continue to keep oil prices elevated; Brent crude futures rose 2% to $114.8 per barrel.