The Reserve Bank of India (RBI) has opened a special dollar window for state-run oil companies and tightened foreign exchange derivative rules as it seeks to ease pressure on the rupee and curb volatility. The measures are intended to provide near-term relief, although broader depreciation risks remain amid elevated crude prices, a strong dollar, high global bond yields and weak capital flows.

The rupee closed at 96.73 against the dollar on October 9, near its record low of 96.96 reached in May. It has declined by more than 7 per cent in calendar 2026 and about 3.5 per cent in FY27. Crude oil accounts for around 25 per cent of India’s imports, and routing oil companies’ daily dollar requirements through the RBI window could shift part of that demand away from the spot market.

The central bank has reduced the threshold for certain foreign exchange derivative transactions without an underlying exposure to $5 mn from $100 mn. It has also restricted the rebooking of cancelled rupee-linked contracts, while permitting rollovers at maturity, and introduced a cash reserve requirement of 20 per cent of the notional value for specified derivative contracts exceeding $2 mn.

The measures are aimed at limiting speculative positions and excessive volatility, but the reserve requirement could increase hedging costs for customers. Analysts said banks could pass on those costs, while importers hedging genuine payment obligations would be less affected. The special dollar window could also moderate forward premiums by reducing immediate demand in the spot market.

The latest steps follow a decline in India’s foreign exchange reserves. Reserves fell by $18.34 bn to $757.46 bn in the week ended September 25 and by a further $12.95 bn to $734.61 bn in the week ended October 2. The RBI has also scheduled an open market sale of government securities worth Rs. 250 bn on October 13 to absorb surplus liquidity. From the fortnight beginning October 16, banks will be required to maintain at least 99 per cent of their prescribed cash reserve ratio on a daily basis, compared with 90 per cent earlier.