Mumbai: The Reserve Bank of India (RBI) on Wednesday allowed state-owned oil marketing companies (OMCs) to raise external commercial borrowings (ECBs) from lenders under the automatic route.

OMCs, including Indian Oil Corp. Ltd, Bharat Petroleum Corp. ltd and Hindustan Petroleum Corp. Ltd, may raise ECBs for working capital with a minimum average maturity of three to five years. The RBI decision comes on the back of a fast depreciating rupee and rising oil prices.

Crude prices are expected to touch $100 per barrel within the next few months, while the Indian rupee breached 73 against the US dollar for the first time on Wednesday.

“It has been decided, in consultation with the government of India, to liberalize the said provision and permit public sector OMCs to raise ECBs for working capital with a minimum average maturity period of 3/5 years from all recognised lenders under the automatic route," the RBI said in a circular on its website.

The overall ceiling for such ECBs, however, has been capped at $10 billion. “It will help OMCs raise funds at better rates. If we borrow domestically, the rates are higher, whereas internationally the rates are more competitive," said a treasury official of one of the OMCs, requesting anonymity.

The RBI has also waived off the individual limit of $750 million or equivalent, and mandatory hedging requirements as per the ECB framework for borrowings. “The $10-billion limit is more than adequate for oil imports so RBI’s move will help raise money far more cheaply," added another treasury official from an OMC.