{
  "id": 13426899,
  "title": "How RBI is borrowing from China playbook to defend rupee",
  "url": "https://urgent.news/2026/10/10/how-rbi-is-borrowing-from-china-playbook-to-defend-rupee",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-10-10T13:37:37.000Z",
  "source": {
    "name": "The Indian Express",
    "slug": "the-indian-express",
    "url": "https://indianexpress.com/article/explained/explained-economics/rbi-rupee-measures-forex-risk-reserve-10915855/"
  },
  "original_language": "en",
  "account": "On Saturday, the Reserve Bank of India (RBI) unveiled a series of measures aimed at stabilizing the rupee, which had dropped to its lowest level in history despite a recent interest rate increase. One unique element borrowed from China's playbook was the requirement for banks to reserve 20% of large foreign exchange derivative contracts involving the rupee with the central bank. This effectively raises the cost of protecting against a weaker rupee.\n\nTraditionally, businesses involved in international trade would hedge against currency fluctuations by paying for foreign purchases in their local currency. However, in the current scenario of declining exchange rates, the RBI has implemented these protective measures due to the pressure of India's persistent trade deficit.\n\nMeanwhile, China had temporarily eliminated its Foreign Exchange Risk Reserve Ratio in March, as the Chinese yuan was appreciating against the dollar. India, on the other hand, faces a persistent weakening of the rupee due to its trade imbalance and higher demand for foreign currency.\n\nThe RBI Governor Sanjay Malhotra has publicly expressed concerns over a potentially undervalued rupee, citing certain metrics. Nevertheless, China's decision to weaken its currency has been linked to its trade surplus, which reached a record high in 2025.\n\nThe RBI's recent measures resemble the 2013 \"taper tantrums\" when the U.S. Federal Reserve signaled a reduction in stimulus measures. These measures, aimed at curbing speculative and structural demand for dollars, include the RBI directly purchasing dollars for the country's state-owned oil marketing companies and stricter regulations on derivatives.\n\nOverall, while these steps might offer temporary relief, their effectiveness will largely depend on factors such as crude oil prices and global investor sentiment.",
  "summary": null,
  "key_points": [
    "RBI implements measures to stabilize weakening rupee.",
    "Banks must reserve 20% of large foreign exchange derivatives with central bank.",
    "Similar to China's 2013 taper tantrums to curb dollar demand."
  ],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}