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I'm not sure why but adding contact stiffness, friction co-efficient and damping fixed it. Like:

<kp>1000000.0</kp> <!-- kp and kd for rubber -->
<kd>100.0</kd>
<mu1>1.0</mu1>
<mu2>1.0</mu2>
<maxVel>1.0</maxVel>
<minDepth>0.00</minDepth>

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