RBI opens special dollar window for state-run oil companies to support rupee

The Reserve Bank of India is stepping in to supply US dollars directly to state-run oil refining companies, attempting to shield the rupee from falling further as crude oil prices climb.

From Monday, 12 October 2026, the central bank will open a special foreign exchange window for Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited, and Bharat Petroleum Corporation Limited. Instead of buying their dollars on the open currency spot market, the three refiners will procure their daily foreign exchange directly through designated banks from the central bank's own reserves.

Why the RBI intervened

India imports the vast majority of its crude oil, making its state-run oil marketing companies the single largest buyers of dollars in the domestic currency market. Together, Indian Oil, HPCL, and BPCL require around $300 million every single day to pay for crude shipments.

When global crude prices rise, that daily demand expands rapidly. If oil refiners rush into the spot market to purchase hundreds of millions of dollars at once, the sudden surge in dollar demand depresses the value of the rupee. By routing those transactions away from open trading desks, the central bank aims to strip out a major source of volatility from the exchange market.

The RBI said in a notification published on Saturday that the decision followed an assessment of current market conditions, adding that the mechanism would remain active until further notice.

How India's foreign reserves stand

The intervention comes at a time when the central bank holds a substantial war chest of foreign currency. The RBI's foreign exchange reserves currently stand at roughly $735 billion.

That reserve total was bolstered recently after the RBI raised more than $127 billion through Foreign Currency Non-Resident (Bank) deposit schemes, alongside an additional $9 billion through overseas foreign currency bonds and external commercial borrowings. With ample liquidity on hand, the central bank is using its buffer to absorb the immediate shock of higher energy import costs rather than letting the currency market take the brunt of it.