The Reserve Bank of India has announced a special dollar window to meet the entire daily foreign currency requirements of three public sector oil marketing companies from October 12, 2026, while tightening regulations governing rupee-linked foreign exchange derivatives to ensure orderly market functioning.

Under the special facility, the RBI will sell US dollars to Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation through designated banks. The facility will remain in place until further notice, the central bank said.

The measures come as the rupee hovers near its all-time low against the dollar, having depreciated more than 7% against the US currency in calendar 2026. The rupee closed at 96.73 per dollar on October 9, near its record low of 96.96 touched in May. Adverse capital flows, elevated oil prices and weak market sentiment have weighed on the currency despite RBI intervention.

The RBI said the decision followed an assessment of prevailing market conditions. The announcement comes alongside a set of regulatory measures aimed at strengthening market discipline, improving risk management and ensuring orderly functioning of the foreign exchange market amid evolving conditions.

In another release, the central bank announced restrictions on rebooking cancelled rupee-linked foreign exchange derivative contracts, reduced thresholds for transactions without establishing underlying exposure, additional documentation requirements and the introduction of a Foreign Exchange Risk Reserve.

Under the revised rules, authorised dealers will not be permitted to allow users to rebook foreign exchange derivative contracts involving the rupee, whether deliverable or non-deliverable, if the contracts were cancelled with any authorised dealer after the issuance of the directions. Rollover of derivative contracts at maturity will continue to be permitted, subject to existing regulatory requirements.

The RBI has also reduced the threshold for undertaking foreign exchange derivative transactions to hedge contracted exposures without establishing the underlying exposure from $100 million to $5 million equivalent across all authorised dealers.

The corresponding threshold for taking positions in exchange-traded currency derivatives involving the rupee, without establishing underlying exposure, has also been cut to $5 million equivalent from $100 million across all recognised stock exchanges taken together.

The move narrows the scope for undertaking rupee-linked derivative transactions without demonstrating the underlying exposure, tightening the framework governing such positions.

Additionally, authorised dealers will be required to obtain and retain an undertaking from users entering into rupee-linked foreign exchange derivative contracts to hedge contracted exposures. The undertaking must confirm that the same underlying exposure has not been hedged with another authorised dealer.

The central bank has also introduced a Foreign Exchange Risk Reserve requirement for rupee-linked foreign exchange derivative contracts with a notional value exceeding $2 million equivalent.

Under the measure, authorised dealers must maintain a cash reserve with the RBI equivalent to 20% of the rupee value of the notional amount of each qualifying transaction. The requirement will apply to rupee-linked foreign exchange derivative contracts undertaken to hedge current account exposures where the user purchases foreign currency against the rupee.

The RBI said the measures are intended to strengthen market discipline and risk management in the foreign exchange market.