India’s RBI curbs make banks wary of corporate rupee hedges

what happened

Moneycontrol reported that Indian banks became more cautious on Monday about offering importers forward dollar hedges. The Reserve Bank of India now requires lenders to keep cash equal to 20% of the notional value of foreign-exchange derivatives used for current-account hedging. The rule locks up liquidity and increases effective costs, which bankers expect to cool the hedging surge that has added to pressure on the rupee.

Two bankers from large foreign lenders said some banks were becoming more selective with forward-dollar contracts and concentrating on their biggest corporate customers. A treasury executive said its mainly importer-based clients were being asked to wait “a day or two”, while exporters continued to receive service. A mid-sized private-sector bank added a fee, quoted in paisa per dollar per month, based on contract size. Most of its importers still chose near-month contracts despite the increase. Banks have asked the RBI to replace the 20% cash-deposit rule with a direct charge on importers’ forward-dollar purchases, Reuters reported on Monday.

Bankers, speaking anonymously because they were not authorized to address the media, estimated that hedging expenses could rise by 80 to 150 basis points, depending on how much lenders pass through to clients. Corporate forward-dollar buying reached a record $77 billion in September, 80% above a year earlier, while sales totaled $41 billion, clearing-house data showed. Three bankers also said online access to these hedging platforms had been temporarily suspended while documentation and compliance procedures were reviewed.

The measures surprised market participants and triggered a weekend rush of calls and meetings between treasury teams and corporate customers. “Bankers burnt the midnight oil after the measures. It appears the RBI did too,” a foreign-exchange salesperson at a large global lender said. The central bank has also allowed oil marketing companies to purchase dollars directly through a special window. BofA Global Research said the steps should support the rupee and curb speculation, though analysts cautioned that the effect could fade unless import costs and capital outflows ease.

why it matters

The rupee was down more than 7% in 2026 before recovering 1% on Monday and had approached its record low of 96.96 per dollar the previous week. That came despite $140 billion raised through special dollar-deposit schemes and higher interest rates. Elevated oil prices, persistent capital outflows and rising global bond yields remain additional strains on the currency.

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