India unveils tough curbs on dollar demand to defend rupee
The central bank aims to curb speculative dollar demand and raise hedging costs as the rupee hovers near record lows.
- On Saturday, the Reserve Bank of India announced a special dollar window for Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited, and Bharat Petroleum Corporation Limited, effective Monday, October 12, 2026.
- Persistent pressure on the rupee, which has declined more than 7% this year, combined with crude oil prices surging above $100 a barrel, prompted the central bank to redirect oil companies' dollar purchases away from the spot market.
- The three companies require about $300 million daily to import crude oil, while the RBI mandated that forex dealers maintain a 20% "foreign exchange risk reserve" on derivative contracts to curb speculative activity.
- Addressing these requirements removes a major demand source from the market, though it will deplete foreign exchange reserves, which currently stand at about $735 billion, said Dhiraj Nim, FX strategist at ANZ Bank.
- While the facility remains open until further notice, underlying drivers including oil prices and capital flows persist. "The real test will be how reserves and the rupee behave in the coming week," Nim added.
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71 Articles
Rupee jumps 82 paise to 94.96 against US dollar in early trade
Mumbai, Oct 13: The rupee appreciated 82 paise to 94.96 against US dollar in early trade on Tuesday, supported by various RBI measures aimed at reducing immediate dollar demand and curbing excessive positions in the foreign exchange market. Forex traders said measures including a dedicated dollar window for oil marketing companies through designated banks and higher costs for certain foreign exchange hedging transactions, are expected to reduce …
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Indian Rupee Gains 1% After RBI Introduces Measures to Reduce Dollar Demand
India’s rupee strengthened against the US dollar on October 12 after the Reserve Bank of India introduced restrictions aimed at curbing foreign-exchange demand from oil companies and businesses hedging against currency depreciation. Analysts warned that the gains could be short-lived if underlying external financial pressures remain unresolved.
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