Overview
- The central bank announced on Saturday a package of steps that will supply dollars directly to Indian Oil, BPCL and HPCL from October 12 through a special window to meet their full daily forex needs.
- India’s foreign exchange reserves fell by about $12.95 billion to roughly $734.6 billion for the week ended October 2, a fourth straight weekly decline that markets and RBI data link to valuation moves and central-bank dollar sales.
- RBI ordered stricter controls on forex derivatives: it banned rebooking of cancelled contracts, cut the threshold for unbacked positions from $100 million to $5 million, and introduced a 20% Foreign Exchange Risk Reserve for eligible contracts above $2 million.
- Markets expect routing oil importers’ dollar demand through the RBI to reduce spot-market pressure on the rupee near the mid-96 level but to show up as further reserve drawdowns and higher hedging costs for companies.
- The moves follow record FCNR(B) diaspora inflows that briefly pushed reserves to a September peak and reflect the trade-offs policymakers now face between stabilising the currency, preserving reserves and shielding firms from costlier hedging driven by high oil prices, dollar strength and foreign outflows.