The Reserve Bank of India (RBI) announced new forex market restrictions on October 10, 2026, including tighter rules for rupee-linked currency derivatives and a special dollar supply facility for three public sector oil marketing companies (OMCs). The measures cover derivative contract rebooking, exposure verification and risk reserves, while the dollar facility will begin on October 12, 2026.
RBI Cuts Forex Derivative Threshold to USD 5 Million
Under the new RBI forex rules, the threshold for undertaking foreign exchange derivative transactions without establishing an underlying exposure has been reduced from USD 100 million to USD 5 million equivalent.
The revised limit applies to transactions with authorised dealers and positions in exchange-traded currency derivatives involving the Indian rupee across all recognised stock exchanges taken together.
The RBI has also restricted the rebooking of cancelled foreign exchange derivative contracts involving the rupee. Authorised dealers will not be permitted to allow users to rebook contracts cancelled after the directions are issued. Rollover of contracts at maturity will remain permitted, subject to existing regulatory requirements.
In addition, authorised dealers must obtain and retain an undertaking from users entering into rupee-linked foreign exchange derivative contracts to hedge contracted exposures. The undertaking must confirm that the same underlying exposure has not been hedged with another authorised dealer.
RBI Introduces Foreign Exchange Risk Reserve
The RBI has introduced a Foreign Exchange Risk Reserve (FERR) requirement for rupee-linked foreign exchange derivative contracts with a notional value exceeding USD 2 million equivalent.
Authorised dealers must maintain a FERR with the RBI in cash equal to 20% of the rupee equivalent of the notional amount of each transaction. The requirement applies to contracts used to hedge current account exposures where users purchase foreign currency against the rupee.
The central bank said the measures are intended to strengthen market discipline, improve risk management and support orderly functioning of the foreign exchange market.
Special Dollar Window for Three Public Sector Oil Companies
Separately, the RBI announced a dedicated dollar supply facility to meet the entire daily dollar requirements of Indian Oil Corporation Limited (IOCL), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL).
Under the arrangement, the RBI will sell US dollars to the three companies through designated banks. The facility will take effect on October 12, 2026, and remain available until further notice.
The announcement was issued through two circulars, A.P. (DIR Series) Circular No. 25 and A.P. (DIR Series) Circular No. 26, dated October 10, 2026.
Q1. What are the new RBI forex rules announced on October 10, 2026?
The RBI introduced restrictions on rebooking cancelled rupee-linked foreign exchange derivative contracts, reduced exposure-related thresholds, required additional documentation and introduced a Foreign Exchange Risk Reserve.
Q2. What is the new threshold for forex derivative transactions without establishing underlying exposure?
The threshold has been reduced from USD 100 million to USD 5 million equivalent.
Q3. What is the RBI’s Foreign Exchange Risk Reserve requirement?
For covered rupee-linked foreign exchange derivative contracts exceeding USD 2 million equivalent, authorised dealers must maintain a cash reserve with the RBI equal to 20% of the rupee equivalent of each transaction’s notional amount.
Q4. When will the RBI’s special dollar window for oil companies begin?
The facility will begin on October 12, 2026, and remain in place until further notice.
Q5. Which oil companies are covered by the RBI’s special dollar facility?
The facility covers Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited. The RBI will sell US dollars to these companies through designated banks.
