Why it is in the news
On Saturday 10 October 2026 the Reserve Bank of India (RBI) issued A.P. (DIR Series) Circulars No. 25 and No. 26 to Authorised Dealers, along with a separate press release opening a special dollar window for the three public sector oil marketing companies — Indian Oil Corporation (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) — from Monday 12 October. The centrepiece is a Foreign Exchange Risk Reserve (FERR): banks must park 20% of the rupee value of eligible forex derivative contracts above US$2 million in cash with the RBI. The package follows the 7 October rate action, when the Monetary Policy Committee raised the repo rate by 25 basis points to 5.50% yet the rupee still fell; it closed at ₹96.73 per dollar on 9 October, near its record low of ₹96.96 (May 2026), and is down almost 7% in 2026.
The exam angle
Issue: Can regulatory curbs on derivatives and targeted dollar supply stabilise a depreciating currency when a rate increase has not, and at what cost to hedging and reserves?