The Reserve Bank of India has introduced a special dollar window for three public sector oil marketing companies and tightened foreign exchange market regulations to combat the depreciating rupee and ensure market stability.
Photograph: Francis Mascarenhas/Reuters
Key Points
- The Reserve Bank of India (RBI) has established a special dollar window for Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd, and Bharat Petroleum Corporation Ltd to cover their daily dollar needs.
- This measure aims to mitigate the ongoing depreciation of the Indian rupee, which recently closed at 96.71 against the US dollar.
- The RBI will sell US dollars directly to these OMCs through designated banks, with the facility effective from October 12, 2026, until further notice.
- New regulatory measures for the foreign exchange market include prohibiting rebooking of cancelled INR derivative contracts and reducing the threshold for derivative transactions without underlying exposure from $100 million to $5 million.
- A Foreign Exchange Risk Reserve (FERR) will be introduced, requiring authorised dealers to maintain 20 per cent of the notional amount in cash for INR derivative contracts exceeding $2 million equivalent, specifically for hedging current account exposures where foreign currency is purchased against INR.
The Reserve Bank on Saturday announced a special window to meet the entire daily dollar requirements of three public sector oil marketing companies (OMCs).
The central bank also announced regulatory measures for the foreign exchange market to strengthen market discipline and ensure appropriate risk management in the foreign exchange market, while maintaining an orderly and transparent market environment.
Addressing Rupee Depreciation
The measure comes as the rupee continues to depreciate amid persisting geopolitical and global economic uncertainty. The local unit closed at 96.71 against the US dollar on Friday.
The three oil marketing companies (OMCs) for which the RBI announced the special window are: Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd, and Bharat Petroleum Corporation Ltd.
“On the basis of assessment of current market conditions, Reserve Bank of India has decided to open a special window to meet the entire daily dollar requirements of three public sector oil marketing companies (OMCs)…” it said.
Under the facility, the RBI will undertake sale of $to the public sector OMCs through designated banks.
The facility will come in effect from October 12, 2026 (Monday) and will remain in place until further notice.
New Forex Market Regulations
As part of regulatory measures, the RBI said, “Authorised dealers shall not permit users to rebook any foreign exchange derivative contract involving INR, whether deliverable or non-deliverable, which has been cancelled with any authorised dealer”.
Rollover of foreign exchange derivative contracts on maturity shall continue to be permitted, subject to compliance with the extant regulatory provisions, it added.
Further, it has reduced the threshold for undertaking foreign exchange derivative transactions without establishing underlying exposure.
“The existing threshold of $100 million equivalent for undertaking foreign exchange derivative transactions to hedge contracted exposures without establishing the existence of the underlying exposure has been reduced to $5 million equivalent, across all authorised dealers,” the RBI said.
The corresponding threshold for taking positions in exchange-traded currency derivatives involving INR, without establishing the existence of underlying exposure, has also been reduced from $100 million to $5 million equivalent, across all recognised stock exchanges taken together.
Introducing Foreign Exchange Risk Reserve
The RBI also announced introduction of Foreign Exchange Risk Reserve (FERR).
In respect of all foreign exchange derivative contracts involving INR that are for notional value exceeding $2 million equivalent, the RBI said “authorised dealers shall be required to maintain with the Reserve Bank an FERR in cash, equal to 20 per cent of the INR equivalent of the notional amount of each transaction”.
This FERR shall be applicable for foreign exchange derivative contracts involving INR undertaken to hedge current account exposures where the user purchases foreign currency against the INR, it said.
