Reserve Bank to sell dollars to three state-owned oil companies directly

RBI Guv Subbarao

In a bid check the free falling of rupee against US dollar, the Reserve Bank of India (RBI) has decided to open a forex swap window to meet the entire daily dollar requirements of three public sector oil marketing companies. These three oil giants are ...
Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL). In a statement, the RBI said on the basis of assessment of current market conditions, the bank has decided to open the forex swap window in designated bank. Under the measure, the apex bank will lend dollars to the three oil marketing companies for equivalent rupees and the oil companies will have to return them over a period of time.
The single window facility gets operationalised with immediate effect and will remain in place until further notice, said the statement.
The RBI last opened such a single window during the 2008 global financial crisis.
The three state-owned oil companies are the biggest buyers of US dollar and they need about $400 million to $500 million daily for importing crude oil. RBI’s measure to allow the oil companies to buy and sell dollar from a single window is expected to ease pressure on the weakening rupee which has touched its historic low of 68.85 on Wednesday. It was in fact rupee’s biggest single-day fall in 18 years.
The measures are the latest in a series of steps taken by the central bank to combat the free fall of rupee which has fallen over 20 percent this year.
The rupee further sank on Wednesday amid fears that foreign investors might pull out their money after signs of recovery in European market were visible. A possible US-led military attack against Syria also increased speculations about a shortfall in the production of crude oil. This will further deepen concerns about the current account deficit and capital outflows.