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RBI’s weekend rupee defence: 20% cash reserve on big dollar hedges, $5 million no-proof limit, oil companies get their own dollar window from today — reserves down to $734.6 billion

The Reserve Bank used a Saturday to tighten the rules on rupee hedging. Banks must now park 20% of large dollar-buying hedges in cash with the RBI, users can hedge only $5 million without proof of an underlying deal, and cancelled contracts cannot be rebooked. From Monday, the RBI will also sell dollars directly to the three state oil companies. Reserves fell $12.95 billion in the week to 2 October.

Capital Chronicle Desk~5 minDual-layer

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What the RBI announced on Saturday 10 Oct 2026 (two circulars and two press releases):

MeasureBeforeNowWhen
Foreign Exchange Risk Reserve (FERR) — on INR derivative hedges above $2 million notional where the user buys dollars for current-account needsNoneBank must keep 20% of the INR notional in cash with RBI, daily, until the contract endsContracts after 10 Oct
Hedge without proving the underlying deal (OTC, across all banks)Up to $100 millionUp to $5 millionImmediate
Exchange-traded rupee futures/options without proof (all exchanges together)Up to $100 millionUp to $5 millionImmediate
Rebooking a cancelled INR hedgeAllowed within rulesNot allowed (rollover on maturity still allowed)Immediate
Double-hedging check—User must sign an undertaking that the same exposure is not hedged with another bankImmediate
Special dollar window for Indian Oil, HPCL, BPCLBought in marketRBI sells them their entire daily dollar need through designated bank(s)From Mon 12 Oct, until further notice

Backdrop (RBI data): forex reserves $734.61 billion on 2 Oct, down $12.95 billion in a week and about $31.3 billion in two weeks (Capital Chronicle arithmetic on RBI weekly data). Rupee reference rate (FBIL) on 9 Oct: ₹96.6149 per dollar.

Takeaway: The RBI is making it costlier to bet against the rupee through hedges, and is taking three large, regular dollar buyers — the state oil companies — out of the open market. Not investment advice.

Analysis

Why the oil window matters

Indian Oil, HPCL and BPCL import crude and pay in dollars almost every day. That steady dollar buying adds pressure on the rupee in the open market. RBI’s 10 Oct press release says it will now meet the entire daily dollar requirement of these three companies itself, selling them dollars through designated bank(s). The dollars still leave the country — but the purchases no longer hit the open market, where they can push the rupee down. The RBI did not say how long the window will stay open: “until further notice”.

The 20% cash reserve, in plain numbers

The FERR is new to India. It applies only when a user buys foreign currency through an INR derivative to hedge current-account payments (imports, services, and similar), and only above $2 million notional.

Illustration (Capital Chronicle arithmetic, at the 9 Oct FBIL rate of ₹96.6149): a $10 million importer hedge = about ₹96.61 crore notional. The bank must deposit 20% — about ₹19.32 crore — in cash with the RBI for the life of the contract. The circular requires the reserve to be held as cash and does not mention any interest on it, so it ties up bank cash; how much of that cost reaches customers is up to each bank. The circular also says splitting one hedge into many small ones, at one or more banks, to stay under $2 million is a violation.

Smaller “no-proof” limit

Until Saturday’s circular, a company could hedge up to $100 million without first showing the underlying export, import or loan. That limit is now $5 million for contracts with banks (OTC, across all banks) and, separately, $5 million for rupee contracts on stock exchanges — a 95% cut in both (Capital Chronicle arithmetic). Above $5 million, the bank must see documents and keep them for at least two years.

Reserves: two big weekly falls

RBI weekly data, US$ million25 Sep2 OctWeek change
Total reserves7,47,5577,34,606−12,952
Foreign currency assets6,15,4116,04,747−10,664
Gold1,08,7011,06,413−2,288
SDRs18,64218,656+15
Reserve position in IMF4,8044,789−15

The week to 25 Sep had already shown a $18.34 billion fall. Reserves are still $43.5 billion higher than at end-March 2026, per the same table. Weekly changes include valuation effects (for example, gold prices and currency moves), so not every dollar of the fall is RBI selling.

What it means for you

  • Importers and companies with dollar loans: large dollar-buying hedges now carry the 20% reserve and tighter paperwork; check terms with your bank before booking.
  • Individuals: none of the circulars covers foreign travel cards, LRS remittances or NRI deposits directly. The rules are about INR derivative contracts with banks and on exchanges.
  • Fuel prices: the window changes where oil companies buy dollars, not the price of crude. The RBI release does not mention fuel prices.

What to watch

  1. The rupee’s first session under the new rules on Monday 12 Oct (the FBIL reference rate is set as at 1 p.m.)
  2. Next RBI weekly reserves print on Friday 16 Oct (week to 9 Oct)
  3. Any further RBI circulars or FAQs on how the FERR and the $5 million limit apply

Sources

Illustrations and percentage changes marked “Capital Chronicle arithmetic” are our calculations on the figures above. Not investment advice.

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