RBI Moves to Support Rupee at 96.78, Cracks Down on Forex Derivatives

The Reserve Bank of India (RBI) has launched a sweeping regulatory crackdown on foreign exchange derivatives to defend the local currency.

The aggressive intervention comes as the Indian rupee hovers at 96.78 against the US dollar, trading dangerously close to its record lifetime low of 96.96 hit in May.

To curb speculative trading and stabilize the market, RBI Governor Sanjay Malhotra announced that authorized dealers are now prohibited from allowing users to rebook cancelled rupee derivative contracts, whether deliverable or non-deliverable.

In a drastic tightening of exposure rules, the central bank slashed the threshold for executing forex derivatives without establishing an underlying exposure from $100 million down to just $5 million.

Furthermore, the RBI introduced a 20% Foreign Exchange Risk Reserve (FERR) cash requirement for rupee-linked derivative hedges exceeding $2 million.

To directly alleviate market dollar demand, the central bank is also opening a special direct dollar window for three major state-run oil marketing companies starting 12 October 2026.

While these stringent measures aim to enforce strict market discipline, analysts warn they may temporarily elevate corporate hedging costs.

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