RBI will supply state oil companies' entire daily dollar needs from Monday
The Reserve Bank of India said Saturday, October 10, 2026, that its dollar sales to the oil companies will run until further notice, and it tightened rupee-derivative rules after the currency closed near a record low.
Key takeaways
The Reserve Bank of India said on Saturday it will sell U.S. dollars to three state oil companies to meet their entire daily dollar needs, starting Monday, October 12, and will keep selling until further notice.
The companies are Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation, the state-owned firms that buy crude abroad and sell fuel at home. The bank will sell through one or more designated banks. It did not name the banks or the price.
Crude is priced in dollars, so these companies need dollars to import it. The release says the bank acted "on the basis of assessment of current market conditions."
The rupee closed Friday, October 9, at 96.73 per dollar, barely changed on the day, and near the record low of 96.96 touched in May 2026. A higher number is a weaker rupee. It takes more rupees to buy one dollar.
Foreign-exchange reserves were $734.60 billion in the week ended October 2, down $12.95 billion that week, a fourth straight weekly decline. Reuters reported they were about $50 billion below the September peak. Reserve Bank data put that peak on September 4.
"Addressing oil companies' dollar requirements removes one of the largest sources of demand from the FX market, which should help reduce volatility but it will show up in a depletion of reserves," said Dhiraj Nim, a foreign-exchange strategist at ANZ Bank in Mumbai, on Saturday.
On Wednesday, October 7, the bank had already raised its policy rate by 25 basis points, a quarter of a percentage point, to 5.50%, the first increase since February 2023. By Friday the rupee was still near the May low.
Governor Sanjay Malhotra said that, by a number of estimates, the rupee is not overvalued and may be undervalued.
"We will support an orderly movement of the rupee in finding its correct value and at the same time in ensuring that there is no excessive volatility," he told reporters on Wednesday.
Tighter rules on rupee hedges
On Saturday the bank issued two circulars "to ensure orderly functioning of the foreign exchange market." It said the steps are meant to strengthen market discipline and risk management.
Banks may not let a customer replace a cancelled contract on the rupee with a new one. Rolling a contract forward when it matures is still allowed. The ban applies to contracts cancelled after Saturday's directions.
The cap on positions taken without proof of a real exposure was cut from $100 million to $5 million. One limit covers hedges of contracted exposures across banks. Another covers rupee positions across exchanges.
When a customer is buying foreign currency against the rupee to pay an everyday cross-border bill, not to make an investment, and the contract is larger than $2 million, the bank that arranges the trade must leave cash at the Reserve Bank equal to 20% of the contract's rupee value.
From Monday, the Reserve Bank is the seller of the dollars those three companies need each day. The sales draw on reserves that have already fallen for four straight weeks.
Frequently asked questions
Which oil companies will get the dollars?
Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.
How long will the sales last?
They start Monday, October 12, and continue until further notice.
Did the bank name the price or the banks it will use?
It did not name the banks or the price.
What did Saturday's hedge rules change?
Banks may not replace a cancelled rupee contract, and the cap on positions without proof of a real exposure was cut from $100 million to $5 million.
