Reserve Bank of India (RBI) imposes curbs on forex derivative contracts and opens special dollar window for three public sector OMCs

Key facts

• The Reserve Bank of India (RBI) on Saturday, October 10, 2026, announced restrictive measures on foreign exchange derivative contracts involving the rupee to strengthen market discipline and ensure orderly functioning of the forex market.
• Authorised Dealers cannot permit users to rebook any cancelled forex derivative contract involving INR, whether deliverable or non-deliverable, while rollover of contracts on maturity remains permitted subject to extant regulations.
• The threshold for undertaking forex derivative transactions to hedge contracted exposures without establishing the underlying exposure has been reduced from USD 100 million to USD 5 million equivalent across all Authorised Dealers, with a corresponding reduction for exchange-traded currency derivatives involving INR across all recognised stock exchanges taken together.
• Authorised Dealers must maintain with the RBI a Foreign Exchange Risk Reserve (FERR) in cash equal to 20% of the INR equivalent of the notional amount for all INR forex derivative contracts exceeding USD 2 million, applicable to contracts hedging current account exposures where the user purchases foreign currency against the rupee.
• Authorised Dealers are required to obtain and retain an undertaking from users confirming that the same underlying exposure has not been hedged with any other Authorised Dealer.
• RBI will open a special window from October 12, 2026, until further notice to meet the entire daily dollar requirements of three public sector oil marketing companies — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation — by selling USD through designated banks.
• The rupee closed at 96.71-96.73 against the US dollar on Friday, has lost about 7% this year, and the measures come amid sustained foreign capital outflows and rising fuel prices.