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The Reserve Bank of India has announced a special dollar window for three state-run oil marketing companies and tighter foreign-exchange hedging rules as it tries to reduce pressure on the rupee. The RBI rupee support measures follow a fall of more than 7% in the currency during 2026, according to Reuters.
Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation will be able to obtain their daily dollar requirements through designated banks from Monday, October 12. The arrangement is intended to move a large source of dollar demand away from the spot foreign-exchange market.
How the RBI rupee support window works
India imports most of the crude oil it consumes, so public-sector fuel companies regularly need substantial amounts of US currency to pay suppliers. When crude prices rise and the rupee weakens, those purchases can intensify demand for dollars in the open market.
Under the special facility, the central bank will sell dollars for the three companies’ requirements through designated banks. The Economic Times reported that the window will meet their full daily requirements and remain available until further notice, depending on market conditions.
The intervention may dampen short-term volatility by taking a major buyer out of the spot market. It does not remove the underlying import bill, however, and dollars supplied by the RBI will be reflected in the use of India’s foreign-exchange reserves.
Forex hedging rules also tightened
Reuters reported that the RBI also imposed a 20% foreign-exchange risk reserve on derivative contracts above $2 million that hedge current-account transactions. It reduced the limit for derivative transactions without proof of an underlying exposure from $100 million to $5 million across instruments.
The changes are designed to discourage oversized or speculative positions that can add to currency volatility. Businesses with genuine import, export or other foreign-currency exposures can still hedge, but banks and customers face closer documentation and risk requirements.
Why the rupee remains under pressure
Rising oil prices increase India’s demand for dollars and can widen the trade deficit. Higher global bond yields and foreign portfolio outflows have added to the pressure. Reuters said the rupee was hovering near record lows when the new steps were announced.
The measures follow the RBI’s October 7 decision to raise the repo rate by 25 basis points to 5.50%. That rate action and the new currency-market steps address different parts of the problem: interest rates target inflation and financial conditions, while the dollar window and hedging restrictions target immediate pressure in the foreign-exchange market.
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