The Reserve Bank of India (RBI) has introduced five measures to ease pressure on the Indian rupee, which remains close to its record low against the US dollar. The steps aim to reduce dollar demand in the spot market, limit speculative activity and manage currency volatility.
The rupee closed at ₹96.73 per dollar on Friday, October 9, approaching its all-time low of ₹96.96 recorded in May. The RBI's latest measures include a special dollar facility for three state-owned oil companies and stricter rules governing foreign exchange transactions.
From October 12, the central bank will meet the daily dollar requirements of Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation through a dedicated facility. This arrangement will remove their immediate dollar demand from the spot market, potentially easing pressure on the domestic currency.
The RBI has also restricted the rebooking of certain cancelled rupee-related forex derivative contracts. Additionally, it has lowered the threshold for specified derivative transactions without documented underlying exposure from $100 million to $5 million.
Another measure introduces a 20% Foreign Exchange Risk Reserve requirement for eligible derivative contracts exceeding $2 million in notional value. Banks must also obtain undertakings to prevent the same underlying exposure from being hedged through multiple authorised dealers.
These steps are intended to strengthen risk management and discourage excessive currency speculation. However, their effectiveness will depend on crude oil prices, foreign investment flows and global dollar movements.
India's foreign exchange reserves fell by $12.95 billion to $734.60 billion in the week ended October 2. While the new measures could provide short-term relief, sustained rupee stability will depend on broader economic conditions and the balance between dollar demand and supply.
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