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On the basis of assessment of current market conditions, the Reserve Bank of India has decided to open a special window to meet the entire daily dollar requirements of three public sector oil marketing companies (OMCs) – Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited. Under the facility, the Reserve Bank will undertake sale of USD to the public sector OMCs through designated banks. The facility will come in effect from October 12, 2026 (Monday) and will remain in place until further notice.
Why do oil companies need US dollars?
India imports a large amount of crude oil from other countries. International crude oil purchases are generally priced and settled in US dollars.
For example, suppose an Indian oil company needs to pay a foreign supplier $100 million for crude oil. The company earns much of its revenue in Indian rupees by selling petrol, diesel and other petroleum products. Therefore, it needs to convert rupees into US dollars to pay the supplier.
Normally, the company purchases dollars through banks in the foreign exchange market.
Why is the RBI introducing this special facility now?
The main reason is pressure on the Indian rupee and increased demand for US dollars. The rupee closed near ₹96.71 per US dollar on 9 October 2026, close to its record-low levels. Rising crude oil prices and foreign investment outflows have added pressure on the currency.
Three important factors explain the RBI’s decision:
- High crude oil prices: When international oil prices rise, Indian oil companies need more dollars to pay for imports.
- Pressure on the rupee: When importers buy more dollars, demand for dollars increases. If dollar supply does not keep pace, the rupee can weaken further.
- Reducing demand in the open market: Instead of purchasing their entire dollar requirements from the regular foreign exchange market, the three oil companies will receive dollars through the RBI’s special facility. This can ease pressure on the market
How till this facility work?
Previously, these companies would generally buy dollars through the foreign exchange market via banks. Under the new arrangement, the RBI will sell them the dollars they require each day through designated banks.
How will this help the Indian rupee?
Consider a simplified example: Suppose the three oil companies collectively need $500 million every day.
- Without the special facility: They purchase these dollars from the regular foreign exchange market, adding to market demand.
- With the special facility: The RBI supplies those dollars through designated banks, taking that demand away from the regular market.
As a result, demand pressure on the open market may decline, helping the rupee stabilise. However, this does not guarantee that the rupee will appreciate. Other factors, such as crude oil prices, foreign investment flows and global demand for dollars, will continue to influence its value.
The RBI is trying to manage two related concerns: ensuring that major oil companies can obtain the dollars they need for essential imports and reducing excessive pressure on the rupee.
The facility is a targeted intervention rather than a permanent solution to the rupee’s weakness. Its effectiveness will depend on broader market conditions and how long the pressure on the currency continues.
