India Implements Measures to Curb Dollar Demand Amid Rupee Weakness
India's Reserve Bank of India (RBI) has introduced new measures aimed at stabilizing the rupee, which is near record lows. The central bank will provide dollars directly from its foreign exchange reserves to three state-run oil companies—Indian Oil, Hindustan Petroleum, and Bharat Petroleum—to meet their daily dollar needs outside the spot market. This move aims to reduce pressure on the currency by removing a major source of demand. In addition, the RBI has tightened hedging rules for corporate entities seeking protection against rupee depreciation. A 20% foreign exchange risk reserve is now required for derivative contracts exceeding $2 million in notional value, raising costs and discouraging speculative activity. The limit on unverified derivative transactions was also reduced from $100 million to $5 million. Despite these measures and over $140 billion in capital inflows through policy initiatives, the rupee remains under pressure due to high oil prices and global bond yields.
Tickers: $INR
Topics: Foreign Exchange Market Indian Rupee Reserve Bank of India (RBI)