New Delhi: The Reserve Bank of India (RBI) ordered state-owned oil companies to buy dollars from a single public sector bank as regulators on Tuesday took a series of measures to boost the rupee that hit a lifetime trading low a day earlier.
State oil refiners, who are the biggest buyers of the dollar, agreed to implement the RBI order with immediate effect, people with direct knowledge of the development said. The companies were even willing to accept RBI selling dollars directly to them through a single window.
The rupee advanced 0.8% to 60.15 per dollar in Mumbai after RBI late Monday barred banks from proprietary trading in currency futures and exchange-traded options and market regulator Securities and Exchange Board of India (SEBI) said separately it will raise margin requirements and cap open positions in such contracts.
RBI on Tuesday issued orders to Indian Oil, Hindustan Petroleum, Bharat Petroleum and Mangalore Refinery to stop seeking quotes from several banks for their $8-8.5 billion monthly US dollar requirement.
The central bank, people familiar with the matter said, asked oil firms to buy dollars from a single bank at their published reference rate.
Indian Oil Corporation Ltd, the nation’s largest refiner, will buy its monthly requirement of $3.8-4 billion dollars from its official banker State Bank of India. Similarly, Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd.and Mangalore Refinery and Petrochemicals Ltd. will buy their dollar requirements from a single bank.
The decision follows Monday’s meeting between RBI and oil firms to discuss measures to control volatility and high fluctuations in the exchange rate.
The central bank had last year suggested that refiners buy their dollar requirement from a single public sector bank to end speculation in rupee market caused by competitive quotes taken from multiple banks.
But the measure was never implemented as RBI did not give a written order as sought by oil firms to end their practice of seeking competitive quotes.