As the exchange rate of the rupee against the US dollar fell to an all-time low last week, the Bank of India urgently announced a series of new measures aimed at boosting the rupee exchange rate on the 10th. India is a major oil importer, and oil procurement forms an important part of India's domestic dollar demand. In terms of curbing oil companies' demand for US dollar purchases, the Bank of India announced the establishment of a special “foreign exchange window” to directly disburse all the US dollars needed for daily purchases to the three state-owned oil companies from the country's foreign exchange reserves. Neem, a foreign exchange strategist at ANZ's Mumbai branch, said that meeting India's domestic oil companies' demand for US dollars is equivalent to solving one of the biggest sources of US dollar demand in the foreign exchange market. This should help reduce exchange rate fluctuations, but at the cost of consuming India's foreign exchange reserves. In addition to oil companies' purchases in US dollars, many investors have recently been hedging transactions with shorting rupees due to concerns that the rupee exchange rate will fall further. In order to limit hedging transactions, the Bank of India has further tightened restrictions on foreign exchange speculation activities — commercial banks are required to deposit reserves with the central bank in the form of cash at 20% of the nominal amount when carrying out rupee foreign exchange derivatives transactions with a nominal amount exceeding 2 million US dollars, directly increasing the bank's capital cost to carry out such business, thereby driving the transmission of related costs to corporate customers shorting rupees. Furthermore, the Bank of India has also lowered the threshold for hedging contracts to be exposed to the underlying assets from the previous $100 million to $5 million to ensure that companies that trade derivatives must serve actual commercial hedging needs. According to the data, the Indian rupee exchange rate has fallen by more than 7% cumulatively since this year. In May of this year, the rupee exchange rate against the US dollar hit a record low of 96.965 rupees per dollar.

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