Indian Refiners Forced to Buy Dollars from a Single Bank

With Indian rupee depreciating sharply against the US dollar, the Reserve Bank of India (RBI) today ordered state-owned oil companies to purchase their US dollar requirement from a single public sector bank so as to curb volatility in the currency.

State oil refiners, who are the biggest buyers of US dollars, agreed to implement the RBI order with immediate effect, sources with direct knowledge of the development said. The companies were even willing to accept RBI selling dollars directly to them through a single window. RBI issued orders to Indian Oil, Hindustan Petroleum, Bharat Petroleum and Mangalore Refinery to stop seeking quotes from several banks for their USD 8-8.5 billion of monthly US dollar requirement.

Oil firms seeking multiple quotes for their dollar requirement was felt to be one of the reasons adding to speculation on demand for the American currency and volatility in the local unit. RBI, sources said, asked oil firms to buy dollars from a single bank at their published reference rate. IOC, the nation’s largest refiner, will buy their monthly requirement of USD 3.8-4 billion dollars from its official banker State Bank of India. Similarly, BPCL, HPCL and MRPL will buy their dollar requirement from a single bank.

via India Express

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza