The Reserve Bank of India has opened a special facility to meet the entire daily US dollar requirement of India's three state-run oil marketing companies: Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.
Under the arrangement, announced in an RBI press release dated October 10, the central bank will sell dollars to the three companies through designated banks. The facility takes effect on Monday, October 12, and will stay in place until further notice. The RBI said the decision was based on its assessment of current market conditions, and it did not set an end date or disclose the pricing mechanism.
The oil marketers need large amounts of dollars every day to pay for crude imports. Normally that demand goes through the foreign exchange market, where it can add pressure on the rupee. Routing it through a dedicated RBI channel takes that demand out of the open market.
The timing reflects the strain on India's import bill. Crude prices have risen above $100 a barrel, and the rupee closed at 96.73 per dollar on Friday, close to the 97 mark, according to the Indian Express. The facility covers the companies' full daily requirement rather than a partial amount, which makes it a substantial intervention.
On the same day, the RBI also tightened rules on rupee-linked foreign exchange derivatives, including limits on rebooking cancelled contracts and a lower threshold for some transactions that can be done without showing an underlying exposure. The central bank said the measures were meant to strengthen market discipline and keep the currency market orderly.
For Indian Oil, HPCL and BPCL, the window removes the risk of struggling to source dollars during volatile sessions. What to watch: how long the facility runs, whether the rupee steadies, and whether similar support is extended to other importers.
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