The RBI dollar window for three public-sector oil companies will open on October 12 as the central bank moves to ensure that Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation can meet their daily foreign-currency requirements amid renewed pressure on the rupee.
The Reserve Bank of India said it would sell US dollars to the three companies through designated banks. The facility will remain in place until further notice, although the central bank has not disclosed the total amount of foreign currency that will be supplied or set a limit for individual transactions.
The arrangement is intended to ensure that the oil marketing companies can access dollars for operational needs, including payments for crude oil imports and other foreign expenses. International crude oil transactions are primarily conducted in US dollars, making exchange-rate movements an important factor in the cost of imports and the companies’ financial requirements.
The RBI’s decision comes as the rupee remains close to its record low against the US dollar despite the central bank’s intervention in the foreign-exchange market and interest-rate increases. The rupee closed at Rs 96.73 to the dollar on Friday, near its all-time low of Rs 96.96 recorded in May, according to the report.
Alongside the special dollar window, the RBI has tightened rules for certain foreign-exchange derivative transactions. The transaction threshold has been reduced from $100 million to $5 million. The revised limit also applies to rupee-linked exchange-traded currency derivatives on recognised stock exchanges.
The central bank said the changes are intended to ensure that large derivative positions are linked to genuine requirements, such as import payments or export-related activity, rather than being used primarily for speculation. For eligible rupee-linked foreign-exchange derivative contracts with a notional value above $2 million, the RBI has introduced a foreign-exchange risk reserve requirement.
Under the new requirement, registered dealers must maintain a cash reserve with the RBI equivalent to 20% of the rupee value of each eligible transaction. The requirement applies to contracts used to hedge current-account risks where users buy foreign currency against the rupee.
The RBI has also introduced stricter documentation requirements for hedging transactions. Registered dealers must obtain and retain an undertaking from users entering foreign-exchange derivative contracts. The undertaking must confirm that the same risk has not been hedged through another dealer, a measure aimed at preventing duplicate hedging of the same exposure.
The immediate effect of the dollar window will be to provide the three oil companies with a designated channel for meeting daily foreign-exchange needs through the banking system. The RBI has not specified how long the arrangement will continue beyond saying that it will remain effective until further notice.
The measures come against a backdrop of pressure on India’s foreign-exchange reserves. The country’s reserves fell by $12.95 billion to $734.60 billion in the week ending October 2, marking a fourth consecutive weekly decline, according to the report. The RBI’s latest steps take effect from October 12.
