RBI unveils six forex steps to ease rupee pressure and curb speculation

The Reserve Bank of India announced six new foreign-exchange measures aimed at stabilising the rupee. Central to the plan is the Foreign Exchange Risk Reserve, a 20% cash reserve requirement on large forex-derivative contracts exceeding $2 million, which limits banks’ on-lending until positions are unwound. The RBI also reduced the transaction threshold to $5 million, extended the reserve to non-resident hedging contracts, and prohibited the rebooking of cancelled trades while still permitting rollovers.

A special dollar window will meet the daily dollar needs of Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp using the central bank’s reserves, easing spot-market demand. Stricter documentation rules for banks aim to prevent duplicate hedging. While forward-premium rates are expected to fall, some importers fear tighter liquidity and higher costs, and analysts see the actions as short-term support, calling for broader reforms to attract stable capital inflows.