Reserve Bank of India Steps In to Support Currency After Steep Rupee Decline

The Reserve Bank of India rolled out a series of intervention measures to support the sliding rupee, marking its strongest action to stabilize the local currency since 2013. The central bank announced the steps following heavy foreign capital outflows and high global crude prices, according to reports from Bloomberg and The Star.

Under the new rules, the central bank established a direct dollar window for state-run oil refiners Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp. The refiners can access dollars through designated lenders to meet their foreign exchange requirements.

The central bank also created a foreign exchange risk reserve requirement. Lenders must set aside a rupee holding equal to 20 percent of the notional amount for derivative transactions exceeding $2 million. Additionally, the Reserve Bank of India prohibited dealers from re-booking canceled forex derivatives tied to the rupee and lowered the limit for derivative transactions without proof of an underlying asset to $5 million from $100 million.

“The RBI’s measures represent a virtual shutdown of the market,” said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors in Mumbai. Bhansali noted that dollar demand from hedging and oil refiners would exit the open market, alongside stricter limits on import and export operations.

The actions follow sustained pressure on the currency, which closed slightly above its record low of 96.9650 against the U.S. dollar on Friday. Foreign institutional investors were net sellers of ₹38,503 crore in Indian equities in October 2026 prior to the announcement, including a single-day sale of ₹12,884 crore on October 9. Overall foreign equity outflows exceeded $30 billion this year, while central bank reserves shrank by $51 billion in the four weeks ending October 2.

To address tighter monetary conditions, the central bank recently raised its repo rate by 25 basis points to 5.50 percent. Meanwhile, Indian stock benchmarks showed movement as the Nifty 50 ended an eight-week losing streak to close at 22,520.45 points, and the Sensex closed at 72,472.33 points.

Offshore trading in New York saw the rupee rise 0.6 percent after the measures were announced. Anindya Banerjee, head of research for commodity and currency derivatives at Kotak Neo, described the package as the most comprehensive set of currency-market measures since 2013, when the central bank previously provided about $12 billion to refiners to help stabilize the currency.