RBI Opens Special Dollar Window for Oil PSUs, Tightens Forex Rules

The Reserve Bank of India (RBI) on Saturday announced a special dollar supply window to meet the entire daily foreign exchange requirements of three public sector oil marketing companies (OMCs), stepping up efforts to stabilise the rupee amid soaring crude oil prices, geopolitical uncertainty and persistent pressure on the domestic currency. The facility will cover Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL), with the central bank supplying US dollars through designated banks from October 12 until further notice.

The rupee closed at ₹96.71 against the US dollar on October 9, as rising energy costs and global economic uncertainty intensified pressure on India's external accounts. The Indian crude oil basket reached $127.04 per barrel on October 8, according to the Petroleum Planning & Analysis Cell (PPAC), increasing concerns over the country's import bill.

The RBI's special facility will allow the three oil companies to obtain their entire daily dollar requirements through designated banks, reducing their need to compete for foreign currency in the regular market. However, the intervention cannot directly reduce global crude prices or guarantee lower petrol and diesel prices.

India's foreign exchange reserves fell by $12.95 billion to $734.60 billion in the week ended October 2, marking their fourth consecutive weekly decline. Reserves had reached approximately $785.71 billion in early September. The decline coincided with currency-market interventions, although valuation changes and other factors also influence reserve movements.

Alongside the dollar window, the RBI tightened foreign exchange derivative regulations. The threshold for specified transactions without establishing underlying exposure has been reduced from $100 million to $5 million. Rebooking cancelled rupee-linked derivative contracts will be prohibited, while permitted rollovers at maturity will continue.

The central bank also introduced a Foreign Exchange Risk Reserve (FERR), requiring authorised dealers to maintain cash reserves equal to 20% of the rupee equivalent of qualifying derivative transactions exceeding $2 million, subject to specified conditions.