The Reserve Bank of India (RBI) on Saturday announced a series of measures to support the Indian rupee, which has come under sustained pressure from rising crude oil prices, foreign investment outflows and elevated global bond yields.
The central bank will open a special window from October 12 to meet the daily dollar requirements of three state-owned oil marketing companies—Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL).
The facility will allow the companies to obtain dollars through designated banks directly from the RBI, reducing their need to purchase the currency in the regular foreign-exchange market.
The measures come as the rupee trades close to its record low against the US dollar. The currency has depreciated by more than 7% in 2026, reflecting persistent external pressures and strong demand for dollars.
How will the RBI’s dollar window work?
Oil marketing companies need substantial amounts of US dollars to pay for imported crude oil. Ordinarily, they purchase the currency through banks in the foreign-exchange market, adding to demand for dollars and potentially putting further pressure on the rupee.
Under the new arrangement, the RBI will supply the dollars required by IOC, HPCL and BPCL through designated banks. The facility is intended to divert a significant source of dollar demand away from the regular market and help moderate currency volatility.
The central bank said the window would take effect on October 12 and remain in place until further notice. However, supplying dollars directly to the oil companies could reduce foreign-exchange reserves, depending on the scale of the transactions and other currency flows.
Market analysts have cautioned that the facility cannot eliminate the underlying pressure caused by expensive oil, foreign capital outflows and demand for protection against further rupee depreciation.
RBI tightens foreign-exchange derivative rules
Alongside the dollar window, the RBI announced tighter rules governing foreign-exchange derivatives involving the rupee. The changes are intended to limit excessive speculative activity and strengthen risk management in the currency market.
The central bank reduced the threshold for foreign-exchange derivative transactions that can be undertaken without establishing an underlying exposure from $100 million to $5 million. The lower threshold also applies to exchange-traded currency derivatives involving the rupee.
The RBI has also introduced a Foreign Exchange Risk Reserve requirement for eligible derivative contracts involving the purchase of foreign currency against the rupee to hedge current-account exposures. Dealers must maintain a reserve equivalent to 20% of the notional value of covered transactions.
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In addition, authorised dealers will not be permitted to allow users to rebook certain cancelled rupee-related foreign-exchange derivative contracts after the new directions take effect. Rollover of contracts at maturity will continue to be permitted.
These changes could increase the cost of certain hedging transactions and discourage repeated rebooking or large positions without a documented underlying exposure. Businesses that legitimately need to hedge foreign-currency payments will need to assess how the revised rules affect their treasury operations.
Why is the RBI intervening now?
The rupee has faced pressure from multiple directions. Rising crude oil prices increase India’s import bill because the country depends heavily on overseas energy supplies. Importers need dollars to settle these purchases, increasing demand for the US currency.
Foreign portfolio investment outflows and elevated US bond yields have added to the pressure. When overseas investors withdraw money from Indian markets, they may convert rupees into dollars, further increasing demand for foreign currency.
The RBI raised its repo rate by 25 basis points to 5.50% on October 7, its first increase in nearly four years. However, higher interest rates alone have not been enough to reverse the currency’s decline.
The latest steps indicate that the central bank is using targeted currency-market measures alongside monetary policy to manage volatility.
Will the measures strengthen the rupee?
The dollar window could reduce immediate demand for dollars in the spot market and help limit sharp movements in the rupee. Tighter derivative rules may also reduce some speculative positions and discourage excessive hedging.
However, the longer-term direction of the currency will depend on crude oil prices, foreign investment flows, global interest rates and India’s external payments position.
The measures also involve trade-offs. Direct dollar supplies to oil companies can draw on foreign-exchange reserves, while tighter hedging rules may increase costs for some businesses seeking protection against currency movements.
Investors and companies will watch the rupee’s response when the facility begins on Monday, October 12. The effectiveness of the measures will become clearer as market participants assess currency movements, reserves and dollar demand over the coming weeks.
This article is for informational purposes only and does not constitute investment advice.
