RBI launches special dollar window for oil companies to stabilize rupee

The Reserve Bank of India (RBI) announced on Saturday that it will open a special window to meet the entire daily dollar requirements of three state-run oil marketing companies (OMCs): Indian Oil Corporation Ltd (IOC), Hindustan Petroleum Corporation Ltd (HPCL), and Bharat Petroleum Corporation Ltd (BPCL). The facility, designed to support the rupee as it trades near its all-time low, will become effective on October 12, 2026, and will remain in place until further notice. Under this arrangement, the RBI will sell dollars to the OMCs through designated banks.

In addition to the oil facility, the central bank has introduced new regulatory measures for the foreign exchange market. Authorised dealers are now prohibited from permitting users to rebook any foreign exchange derivative contract involving the rupee, whether deliverable or non-deliverable, that has been cancelled after the issuance of these directions. While the rollover of derivative contracts on maturity remains permitted, the RBI has reduced the threshold for undertaking foreign exchange derivative transactions without underlying exposure from $100 million to $5 million. This same $5 million threshold now applies to exchange-traded currency derivatives involving the rupee across all recognized stock exchanges.

Furthermore, the RBI has introduced a Foreign Exchange Risk Reserve (FERR), requiring forex dealers to maintain a reserve equal to 20 per cent of the notional amount of each eligible derivative transaction involving the rupee. The central bank stated these measures aim to strengthen market discipline and ensure orderly risk management. These interventions follow significant pressure on the Indian currency, which has depreciated 6 per cent since the West Asia conflict began in late February and over 8 per cent during the past year. India’s foreign exchange reserves declined by approximately $51.1 billion in the four weeks ending October 2, following a record high of $785.7 billion reached in the week ending September 4.

What to watch: The impact of the new FERR requirement on forex dealer liquidity and market volatility.

Editor's note: The draft accurately synthesizes the technical regulatory changes and the context of the RBI's intervention.