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The Reserve Bank of India (RBI) announced fresh rupee defense measures on October 10, 2026, targeting dollar demand and speculative currency trades. The package introduces a special dollar window for three state-owned oil companies and tighter foreign exchange derivative rules to curb volatility.
The measures arrive as the rupee trades near its record low against the US dollar. The currency closed at Rs. 96.73 on October 9, approaching its record low of Rs. 96.96 recorded in May. The RBI aims to ease immediate market pressure while strengthening oversight of currency transactions.
From October 12, the RBI will meet the daily dollar requirements of Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL). The central bank will supply dollars through designated banks, reducing these companies' direct demand in the spot foreign exchange market.
India imports substantial quantities of crude oil, making oil companies significant dollar buyers. The new facility could reduce immediate competition for dollars, although supplying them will draw on the RBI's foreign exchange reserves.
The central bank has also restricted the rebooking of cancelled rupee-linked forex derivative contracts. Users cannot rebook eligible contracts cancelled after the directions take effect, although existing rules still permit rollovers at maturity.
Another major change reduces the threshold for certain derivative positions without documented underlying exposure from USD 100 million to USD 5 million. The revised limit also covers exchange-traded currency derivatives involving the rupee, potentially limiting large speculative positions.
The RBI has introduced a Foreign Exchange Risk Reserve (FERR) requirement for specified rupee-linked derivative contracts exceeding USD 2 million. Authorised dealers must maintain a cash reserve equal to 20% of the transaction's rupee equivalent value for eligible contracts.
Additional documentation rules will require users to confirm that another authorised dealer has not hedged the same underlying exposure. This measure aims to prevent duplicate hedging and improve transparency across currency transactions.
Meanwhile, India's foreign exchange reserves fell by USD 12.95 billion to USD 734.60 billion in the week ended October 2. The decline marked the fourth consecutive weekly fall, leaving reserves around USD 51 billion below September's record high.
The RBI's package could ease short-term dollar demand and discourage speculative activity, supporting greater currency market stability. However, sustained rupee recovery will also depend on crude oil prices, foreign investment flows and broader movements in the US dollar.
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