RBI opens special dollar window for PSU oil firms to steady rupee
Synopsis
The RBI has launched a dedicated dollar supply line for India's three largest state-run oil firms — IOC, HPCL, and BPCL — effective 12 October 2026, removing their bulk crude-import demand from the open forex market. Paired with sweeping new derivative curbs and a mandatory 20% cash reserve on large INR contracts, it is the central bank's most multi-layered rupee defence in recent times.
Key Takeaways
The RBI announced a special US dollar supply window on 10 October 2026 , opening 12 October 2026 with no fixed end date.
The window covers the entire daily dollar needs of Indian Oil Corporation , Hindustan Petroleum Corporation , and Bharat Petroleum Corporation .
Authorised dealers must now obtain undertakings confirming no double-hedging of the same underlying exposure across dealers.
Rebooking of cancelled INR forex derivative contracts is banned effective immediately under the new RBI directions.
The threshold for derivative transactions without underlying exposure proof is cut to $5 million across all authorised dealers.
A Foreign Exchange Risk Reserve of 20% of the INR-equivalent notional amount is mandatory for INR contracts exceeding $2 million .
The Reserve Bank of India (RBI) on Saturday, 10 October 2026 unveiled a package of measures to support the Indian rupee, anchored by a dedicated dollar supply window for three state-run oil marketing companies (OMCs). The facility, which opens on 12 October 2026, will remain operational until further notice and is designed to insulate the currency market from the outsized daily dollar demand of public sector energy giants.
How the Special Dollar Window Works
Under the scheme, the RBI will directly supply US dollars to meet the entire daily foreign exchange requirements of Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL), and Bharat Petroleum Corporation (BPCL) through designated banks. By channelling these bulk purchases outside the open market, the central bank aims to prevent the OMCs' routine import-related dollar demand from amplifying rupee volatility. Collectively, the three companies account for a significant share of India's daily forex demand, given the country's heavy dependence on imported crude oil.
Tighter Rules on Forex Hedging
The RBI simultaneously moved to close loopholes in the foreign exchange derivatives market. Authorised dealers will now be required to obtain and retain an undertaking from counterparties entering into foreign exchange derivative contracts involving the INR to hedge contracted exposures, 'confirming that the same underlying exposure has not been hedged with any other Authorised Dealer,' the central bank stated. The measure targets double-hedging — a practice that can distort demand signals in the forex market.
In a separate directive, the RBI barred authorised dealers from rebooking cancelled foreign exchange derivative contracts involving the rupee, whether deliverable or non-deliverable, after the issuance of the new directions. '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 after the issuance of the directions,' the statement noted.
New Thresholds and Reserve Requirements
The central bank also tightened the limit for undertaking forex derivative transactions without establishing an underlying exposure, reducing it to $5 million equivalent across all authorised dealers. Additionally, for all INR-linked forex derivative contracts with a notional value exceeding $2 million, authorised dealers must now maintain a Foreign Exchange Risk Reserve with the RBI. The reserve must be held in cash at 20 per cent of the INR equivalent of the notional amount of each transaction — a liquidity buffer intended to contain systemic risk from large speculative positions.
Why These Measures Matter
The package marks one of the more comprehensive RBI interventions in the forex market in recent memory, combining direct dollar supply with structural curbs on speculative activity. The rupee has faced persistent pressure from global dollar strength, elevated crude prices, and portfolio outflows, making a coordinated policy response necessary. Notably, the OMC window mirrors a mechanism the RBI has deployed at past stress points, reflecting the central bank's preference for targeted supply-side intervention over broad market sales. The tightening of derivative norms adds a regulatory dimension that could reshape how corporates and traders manage currency risk going forward.
What Happens Next
The special dollar window becomes operational on 12 October 2026, with no fixed end date. Market participants will closely watch whether the facility succeeds in compressing the rupee's intraday swings. The derivative rule changes take effect immediately upon issuance of the RBI's directions. Analysts are expected to assess whether the 20 per cent Foreign Exchange Risk Reserve requirement will raise hedging costs for large corporates, potentially influencing import and export pricing decisions in the months ahead.
Point of View
But it is essentially a subsidy of market function: it reduces volatility without addressing the underlying current-account dynamics that make India's currency perpetually vulnerable to crude price spikes. The 20% Foreign Exchange Risk Reserve requirement is the more consequential long-term measure — it raises the cost of large speculative positions and could meaningfully reduce the scale of leveraged rupee bets. What remains to be tested is whether tighter hedging norms clip genuine corporate risk-management activity alongside speculation, which could raise import costs for businesses that rely on forward cover.
NationPress
10 Oct 2026
Frequently Asked Questions
What is the RBI's special dollar window for oil marketing companies?
It is a dedicated facility through which the RBI will supply US dollars directly to meet the entire daily foreign exchange requirements of Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation via designated banks. The window opens on 12 October 2026 and will remain in place until further notice, aiming to reduce the rupee's exposure to bulk crude-import dollar demand.
Why has the RBI introduced these rupee support measures?
The RBI has acted to stabilise the Indian rupee amid sustained pressure from global dollar strength, elevated crude oil prices, and portfolio outflows. By removing OMC dollar demand from the open market and tightening speculative derivative activity, the central bank is targeting both supply-side and demand-side sources of currency volatility.
What are the new rules on forex derivative hedging?
Authorised dealers must now obtain written undertakings from clients confirming that the same underlying exposure has not been hedged with any other authorised dealer. Rebooking of cancelled INR forex derivative contracts — whether deliverable or non-deliverable — is prohibited after the RBI's new directions take effect.
What is the Foreign Exchange Risk Reserve requirement announced by the RBI?
For all INR-linked forex derivative contracts with a notional value above $2 million, authorised dealers must maintain a cash reserve with the RBI equal to 20% of the INR equivalent of the notional amount. The measure is intended to act as a liquidity buffer against large speculative positions in the currency market.
How does the reduced $5 million threshold affect forex derivative transactions?
The RBI has lowered the limit for undertaking forex derivative transactions without proof of an underlying exposure to $5 million equivalent, applicable across all authorised dealers. This makes it harder for participants to take on large speculative currency positions without demonstrating a legitimate hedging need.
