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RBI Activates Second Line of Rupee Defence with Forex Curbs and Oil Dollar Window
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Moneycontrol•12-10-2026, 12:15
RBI Activates Second Line of Rupee Defence with Forex Curbs and Oil Dollar Window
- •The Reserve Bank of India has activated a second line of currency defence by introducing restrictions on foreign exchange derivatives, a foreign exchange risk reserve, and a special dollar window for oil marketing companies.
- •Market participants are now barred from rebooking cancelled rupee derivative contracts, and the threshold for transactions without established underlying exposure has been drastically reduced from $100 million to $5 million.
- •The RBI is selling dollars through designated banks to three public sector oil marketing companies to fulfill their daily requirements and curb speculative activity.
- •To tighten liquidity, the RBI raised the daily minimum cash reserve ratio maintenance requirement to 99% and announced additional open market operation sales of Rs 250 billion.
- •Nomura noted that these measures signal policymakers' discomfort with ongoing rupee depreciation, though they may increase hedging costs and reduce market liquidity.
Key Questions Answered
The Reserve Bank of India introduced restrictions on foreign exchange derivative transactions, established a 20% foreign exchange risk reserve for contracts exceeding $2 million, and launched a special dollar window for public sector oil marketing companies.
The RBI barred market participants from rebooking cancelled rupee derivative contracts and lowered the threshold for transactions without established underlying exposure from $100 million to $5 million.
The RBI raised the daily minimum cash reserve ratio (CRR) maintenance requirement from 90% to 99%, effective October 16, and planned additional open market operation (OMO) sales of Rs 250 billion on October 13 to drain liquidity.
