The central bank has restricted the rebooking of cancelled rupee-linked derivative contracts and introduced a Foreign Exchange Risk Reserve
The Reserve Bank of India (RBI) has announced a series of measures to support the rupee, which is trading close to its all-time low, including a special window to meet the daily dollar requirements of three state-run oil marketing companies (OMCs).
The facility will cover Indian Oil Corporation Ltd (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL). It will take effect from 12 October 2026 and remain in place until further notice, the central bank said in a press release on Saturday.
Under the arrangement, the RBI will sell dollars to the three public sector OMCs through designated banks to meet their daily foreign currency requirements.
Restrictions On Forex Derivatives
The RBI has also introduced regulatory measures for the foreign exchange market, including restrictions on the rebooking of cancelled foreign exchange derivative contracts involving the Indian rupee.
“Authorised Dealers shall not permit users to rebook any foreign exchange derivative contract involving INR, whether deliverable or non-deliverable, which has been cancelled with any Authorised Dealer after the issuance of the Directions,” the RBI said.
However, the rollover of foreign exchange derivative contracts on maturity will continue to be permitted.
The central bank has also reduced the threshold for undertaking foreign exchange derivative transactions without establishing an underlying exposure to USD 5 million from USD 100 million.
The corresponding threshold for taking positions in exchange-traded currency derivatives involving the rupee, without establishing an underlying exposure, has also been lowered to USD 5 million equivalent from USD 100 million. The revised threshold applies across all recognised stock exchanges taken together.
New Foreign Exchange Risk Reserve
The RBI has introduced a Foreign Exchange Risk Reserve (FERR), requiring forex dealers to maintain a reserve equivalent to 20 per cent of the notional amount of each eligible derivative transaction involving the rupee.
The reserve will apply to foreign exchange derivative contracts involving the rupee that are undertaken to hedge current account exposures, where the user purchases foreign currency against the rupee.
The RBI said the measures were intended to strengthen market discipline and ensure appropriate risk management in the foreign exchange market, while maintaining an orderly and transparent market environment.
Rupee Under Pressure
The rupee has depreciated by 6 per cent since the West Asia conflict began in late February. Over the past year, the Indian currency has declined by more than 8 per cent.
The RBI has been intervening heavily in the foreign exchange market to curb volatility and limit pressure on the currency.
India’s foreign exchange reserves declined by around USD 51.1 billion in the four weeks ended 2 October, after reaching a record USD 785.7 billion in the week ended 4 September.
The latest measures come amid sustained pressure on the rupee and a decline in the country’s foreign exchange reserves.
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