The Reserve Bank of India’s (RBI) weekend measures to stem the rupee’s depreciation could ease pressure on the spot market and forward premiums in the near term, but are unlikely to reverse the currency’s broader weakening trend, market participants said.
The rupee closed at 96.73 per dollar on Friday, near its record low of 96.96 per dollar touched on 20 May 2026.
On Saturday, the central bank announced a dedicated dollar window for the three state-run oil marketing companies and tightened foreign exchange derivative rules to reduce speculative demand and importer hedging demand.
“The measures are expected to result in a near-term reduction in USDINR as well as lower forward premiums,” said Gaura Sen Gupta, chief economist, IDFC First Bank.
“That said, over the medium term, the trajectory of USDINR will be determined by global factors and balance of payments dynamics. These factors would keep depreciation pressure on the currency in the medium term, but RBI measures will reduce the pace of depreciation.”
The Indian rupee has depreciated by more than 6 per cent over the past year and around 6 per cent since the West Asia conflict, amid elevated crude oil prices, a strong dollar, high global bond yields and weak capital flows. The latest measures come as the currency faces renewed pressure near the 97-per-dollar mark.
“These measures will help for now, but they don’t fix what is driving the rupee lower. Crude is still high, the dollar is strong, global yields are elevated and our balance of payments is weak. Until that change, the pressure on the rupee will stay,” a treasury head at a private bank said.
The RBI said it would meet the entire daily dollar requirements of Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) through the special window from October 12.
Public sector OMCs account for around $10 billion-$12 billion of monthly oil-related dollar demand, or $300 million-$400 million a day, according to market participants. Routing these purchases through the RBI could reduce demand in the open market and help ease pressure on the rupee.
“While some of this demand could be in forwards, we see this measure of RBI providing a separate window to OMCs as helping remove a significant amount of spot Dollar demand from the market,” said Kotak Mahindra Bank in a report.
The central bank has also restricted the rebooking of cancelled rupee-linked foreign exchange derivative contracts, whether deliverable or non-deliverable. It has lowered the threshold for transactions to hedge contracted exposures without establishing the underlying exposure to $5 million from $100 million, calculated across all authorised dealers. This step will effectively remove speculative positions against the rupee, though it does not affect genuine hedging activity.
A similar threshold applies to rupee-linked exchange-traded currency derivatives across recognised exchanges. The revised threshold entails additional documentation requirements and is not an overall $5 million cap on genuine hedging transactions.
The RBI has also introduced a Foreign Exchange Risk Reserve (FERR) requirement under which authorised dealers must maintain cash with the central bank equivalent to 20 per cent of the rupee value of specified derivative contracts where users buy foreign currency against the rupee and the notional value exceeds $2 million.
“During periods when there is sustained depreciation pressure on the INR, importer hedging increases while that of exporters reduces. This gap in hedging behaviour between importers and exporters creates additional dollar demand. To address this, RBI has introduced Foreign Exchange Risk Reserve (FERR), which is like an FX CRR,” Sen Gupta said.
The additional reserve requirement could raise hedging costs for clients as banks pass on the higher cost of funds, potentially reducing demand for forward cover and easing forward premiums, market participants said. Importers hedging actual payment obligations could face a different impact from those undertaking transactions without establishing the underlying exposure.
The RBI’s latest steps follow earlier interventions to contain volatility. In August 2013, the central bank opened a special window for the same three oil companies to meet their daily dollar requirements through dollar-rupee swaps. In March 2026, it capped banks’ net open dollar-rupee positions in the onshore deliverable market at $100 million and subsequently tightened access to non-deliverable forward contracts for clients and related parties.
