RBI opens special dollar window for oil companies as rupee slides

The Reserve Bank of India (RBI) on Saturday announced a special window to meet the entire daily dollar requirements of three public sector oil marketing companies (OMCs), as the rupee continues to weaken amid geopolitical tensions and global economic uncertainty. 

The central bank also announced a series of regulatory measures for the foreign exchange market, aimed at strengthening market discipline, improving risk management, and maintaining an orderly and transparent trading environment. The rupee closed at 96.71 against the US dollar on Friday. 

The three OMCs covered under the special facility 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)..." the RBI said. 

Under the facility, the central bank will sell US dollars to the three companies through designated banks. The arrangement will take effect from October 12, 2026, and remain in place until further notice. 

RBI tightens rules on foreign exchange derivatives 

As part of the regulatory measures, the RBI has restricted the rebooking of cancelled foreign exchange derivative contracts involving the rupee. "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," the central bank said. 

However, the rollover of foreign exchange derivative contracts upon maturity will continue to be permitted, subject to existing regulatory provisions. The measures are intended to strengthen discipline in the foreign exchange market and ensure appropriate risk management amid heightened volatility. 

Exposure threshold cut from $100 million to $5 million 

The RBI has also sharply reduced the threshold for undertaking foreign exchange derivative transactions without establishing the existence of the 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 the rupee, without establishing an underlying exposure, has also been reduced from $100 million to $5 million. The revised threshold will apply across all recognised stock exchanges taken together. 

New foreign exchange risk reserve introduced 

The RBI has also announced the introduction of a Foreign Exchange Risk Reserve (FERR) for certain rupee-linked foreign exchange derivative contracts. 

For such contracts with a notional value exceeding $2 million, authorised dealers will be required to maintain a reserve with the RBI in cash. "Authorised dealers shall be required to maintain with the Reserve Bank an FERR in cash, equal to 20% of the INR equivalent of the notional amount of each transaction," the central bank said. 

The FERR requirement will apply to rupee-linked foreign exchange derivative contracts undertaken to hedge current account exposures where the user purchases foreign currency against the rupee.