Dedicated dollar access for three oil companies
The Reserve Bank of India has announced a special window to meet the full daily dollar requirements of three public sector oil marketing companies. The Economic Times reported that the facility will cover Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.
It is scheduled to begin on October 12 and continue until further notice. Under the arrangement, the RBI will sell US dollars through designated banks. ET said the central bank cited its assessment of prevailing market conditions when announcing the measure.
Sources: RBI opens special dollar window for three state-run oil firms
Changes to rupee-linked derivative transactions
Business Standard separately reported the oil-company facility as part of a set of foreign-exchange measures announced on Saturday. Its report said authorised dealers will no longer permit users to rebook cancelled derivative contracts involving the rupee under the new directions. Rollover of contracts at maturity will remain permitted.
The RBI also lowered the threshold for foreign-exchange derivative transactions without establishing an underlying exposure from $100 million to $5 million, according to Business Standard. The corresponding limit for positions in rupee-linked exchange-traded currency derivatives was reduced to $5 million equivalent across recognised exchanges together.
Sources: RBI opens special dollar window for oil firms as rupee comes under pressure
Risk reserve is another part of the package
Business Standard reported the introduction of a Foreign Exchange Risk Reserve equal to 20 per cent of the notional amount of each eligible derivative transaction involving the rupee. The reported scope includes contracts used to hedge current-account exposures where the user buys foreign currency against the rupee.
The stated aim of these measures is stronger market discipline and appropriate risk management while maintaining an orderly foreign-exchange market. The announced October 12 start concerns the oil-company dollar window. The reports do not establish a fixed end date for that facility or guarantee a particular rupee exchange rate.
Sources: RBI opens special dollar window for oil firms as rupee comes under pressure
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