Rupee Under Pressure: RBI’s New Rules Create Banking Confusion

India’s foreign-exchange market is facing fresh uncertainty after the Reserve Bank of India (RBI) introduced stricter measures to support the weakening rupee. The new rules aim to reduce speculative trading and ease pressure on the Indian currency, but their implementation has raised questions among banks and forex dealers.

What Has the RBI Changed ?

The RBI has expanded the Foreign Exchange Risk Reserve (FERR) requirement to cover a wider range of rupee-linked foreign-exchange derivative transactions by authorised banks. It has also tightened rules governing non-deliverable forward contracts, limiting their use to genuine hedging rather than speculation. In addition, the central bank has arranged direct dollar supplies for state-run oil companies to help meet their import needs.

Why Are Banks Confused?

Several banks reportedly paused quoting dollar-rupee forward rates while seeking clarity on how the expanded reserve requirement should be applied. Financial institutions have raised questions about reserve calculations, liquidity ratios, compliance procedures and the costs of implementing the changes. The uncertainty has disrupted parts of the forex market and contributed to wider differences between buying and selling quotes.

Will These Rules Strengthen the Rupee?

The measures appear to have provided some immediate support. On October 13, the rupee strengthened to around ₹95.25 per US dollar, according to Reuters. However, the currency remains under pressure from expensive crude oil, foreign capital outflows and broader global uncertainty.

The RBI faces a difficult balancing act: discouraging speculative pressure while keeping legitimate currency transactions functioning smoothly. Clear guidance and effective implementation will be important in determining whether these measures deliver lasting stability.

For businesses and consumers, the key question remains: Can tighter forex rules protect the rupee without creating fresh uncertainty for the market?