Reserve Bank of India Launches Emergency Rupee Support Measures

The Reserve Bank of India implemented a series of aggressive emergency measures over the weekend of October 10-11, 2026, to defend the rupee after it approached record lows. The currency has declined more than 7% this year, driven by crude oil prices exceeding $100 per barrel, rising global bond yields, and foreign portfolio outflows. These interventions, described by analysts as the strongest since the 2013 taper tantrum, led to an immediate rally of 1% to 2% in early trading on October 12.

To reduce open-market demand for US dollars, the central bank opened a special window effective October 12 to supply the entire daily dollar requirements of three state-run oil marketing companies: Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation. This facility allows the bank to sell dollars through designated authorized dealers rather than through direct open-market bidding.

Simultaneously, the central bank tightened foreign exchange derivative rules to curb speculation. It reduced the limit for trading without proof of underlying exposure from $100 million to $5 million and introduced a 20% Foreign Exchange Risk Reserve (FERR), requiring banks to maintain cash equivalent to 20% of the notional value for specified contracts. The bank also prohibited the rebooking of cancelled derivative contracts.

These actions follow a period of significant reserve depletion, with foreign exchange reserves falling by $12.95 billion to $734.61 billion for the week ended October 2. Governor Sanjay Malhotra noted that reserves still provide roughly 11 months of import cover. While the measures provided immediate relief, some analysts warn they may create high opportunity costs for banks and could lead to market paralysis.