Reserve Bank of India Launches Measures to Stabilize Rupee

The Reserve Bank of India implemented a comprehensive stabilization package on October 10, 2026, to defend the rupee as it approached record lows. Central to the plan is a special foreign exchange window, effective October 12, which will supply the entire daily US dollar requirements of three state-run oil marketing companies: Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation. This direct-sale facility, the first of its kind since 2013, aims to reduce demand and volatility in the open spot market.

To stifle speculative bets, the central bank slashed the limit for currency derivative positions without proof of underlying exposure from $100 million to $5 million. It also mandated a 20% foreign exchange risk reserve for contracts exceeding $2 million and prohibited the rebooking of cancelled derivative contracts. These interventions follow a period of intense pressure where the rupee closed at 96.73 per dollar on October 9, near its all-time low of 96.96.

The measures come amid a significant drawdown of foreign exchange reserves, which fell by $12.95 billion to $734.61 billion for the week ended October 2. Total reserves dropped roughly $51.1 billion from a September peak, driven by the central bank selling approximately $30 billion in September to limit volatility caused by rising crude oil prices and capital outflows. Despite the decline, Governor Sanjay Malhotra stated that reserves still provide roughly 11 months of import cover and represent 94.4% of India's external debt.