The Reserve Bank of India (RBI) has tightened foreign exchange derivative rules to curb speculative trading and ease pressure on the Indian rupee, which has weakened to around ₹96.78 against the US dollar, close to its reported record low. The currency has come under pressure due to foreign capital outflows, uncertainty over crude oil prices and a stronger US dollar.
Under the new measures, the RBI has restricted the rebooking of certain cancelled rupee-linked forex derivative contracts and reduced the limit for positions without underlying exposure from $100 million to $5 million equivalent. It has also introduced a 20% Foreign Exchange Risk Reserve requirement for eligible rupee-linked derivative contracts exceeding $2 million in notional value, along with additional documentation requirements for hedging transactions.
From October 12, the RBI will also meet the daily foreign exchange requirements of three state-owned oil marketing companies — Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum — to reduce their direct demand for dollars in the forex market. Meanwhile, India’s foreign exchange reserves fell by $12.95 billion to $734.60 billion in the week ended October 2, according to the figures cited in the report. Market participants will closely watch whether the RBI’s measures help stabilise the rupee and ease pressure on the country’s foreign exchange market.
