India Tightens Rupee Controls
RBI introduces new currency-hedging restrictions
India’s central bank has introduced measures to reduce pressure on the rupee by curbing corporate demand for currency hedging. The Reserve Bank of India (RBI) is asking banks to maintain reserves against large hedging positions and limiting the repeated rebooking of cancelled rupee-linked derivative contracts.
The rupee has lost nearly 7% against the US dollar in 2026, making it the region’s worst-performing currency, according to the Reuters report. It approached a record low of 96.96 per dollar in the previous week despite earlier measures, including $140 billion raised through special dollar deposit schemes and higher interest rates.
Corporate demand for dollar hedging rises
Clearing-house data showed that corporate purchases of forward dollars reached a record $77 billion in September. That was an 80% increase from a year earlier. Corresponding sales were much lower, at $41 billion.
Six bankers told Reuters that the new measures could increase hedging costs by 80 to 150 basis points. The final impact will depend on how much of the additional cost banks pass on to clients.
The changes caught market participants off guard. Bank treasury teams and corporate clients held urgent discussions over the weekend. Banks also worked to update procedures, answer client questions, and review regulatory requirements before Monday trading began.
RBI targets demand from oil companies
The central bank has also allowed oil marketing companies to purchase dollars directly from the RBI through a special window.
Kunal Kurani, vice president at Mecklai Financial, said the measure directly targets two major sources of daily dollar demand: oil companies and importers.
However, bankers cautioned that the measures may have limited lasting impact unless the underlying pressure on the rupee begins to ease. High oil prices and foreign investor outflows remain important factors behind the currency’s weakness.
