Reserve Bank of India Tightens Forex Rules to Stabilize Rupee

The Reserve Bank of India introduced a series of regulatory measures on October 13, 2026, to stabilize the rupee and reduce excessive demand for US dollars. These interventions helped the rupee strengthen for a second consecutive day, opening at 95.17 and reaching 95.05 per US dollar. The currency's recovery was further supported by a decline in Brent crude prices and the US dollar index.

To curb speculation, the central bank established a dedicated dollar window for state-owned oil marketing companies and tightened rules on foreign exchange derivative positions. New mandates require banks to maintain a 20 percent reserve for dollar purchases exceeding $2 million and prohibit authorized dealers from allowing users to rebook cancelled derivative contracts. Additionally, the RBI lowered the documentation threshold for derivative transactions from $100 million to $5 million.

An analysis by ICICI Bank noted that these rules increase hedging costs for importers and aim to move the hedging ratio toward equilibrium to cool depreciation pressure. The report also highlighted that increasing the daily cash reserve balance requirement to 99 percent, alongside the risk reserve, is estimated to sterilize 0.4-0.6 percent of net demand and time liabilities, a move that has pushed bond yields higher.