Stories
RBI Takes Major Steps To Save The Rupee With Three Strict Measures
- •The Reserve Bank of India has taken full-force action to halt the historic decline of the rupee as it reached close to its all-time low
- •A special window has been opened for three state-owned oil companies IOCL, HPCL, and BPCL to directly access foreign exchange reserves instead of buying from the market
- •The position limit in exchange-traded currency derivatives has been slashed by 95 percent from 100 million dollars to 5 million dollars to prevent speculation
Key Questions Answered
To halt the historic decline of the rupee, the RBI announced strict measures including opening its foreign exchange reserves to three state-owned oil companies (IOCL, HPCL, and BPCL) so they can borrow directly instead of buying dollars from the market. Additionally, the central bank slashed currency derivative position limits by 95% and tightened trading rules to curb speculation.
Starting Monday, three major state-owned oil companies—Indian Oil Corporation (IOCL), Hindustan Petroleum (HPCL), and Bharat Petroleum (BPCL)—can borrow dollars directly from the RBI's foreign exchange reserves. This special arrangement prevents a sudden surge in dollar demand from crude oil imports, stabilizing the currency market and reducing exchange rate fluctuations.
The RBI slashed the position limit in exchange-traded currency derivatives by 95 percent, bringing it down from $100 million to $5 million. Furthermore, foreign exchange dealers are barred from rebooking client derivative transactions, and traders must set aside 20 percent of each transaction's notional amount as a risk reserve to prevent artificial volatility.
