In the quiet machinery that keeps a nation's money steady, India's central bank has reportedly asked its state-run oil refiners to step back from the open dollar market and draw instead on a special credit line through the country's largest state-backed lender. The request answers a familiar strain: when the price of oil climbs and foreign investors pull money out, a currency weakens, and the rupee had sunk past 95 to the dollar in March as fears of the Iran war spread. The move echoes a tactic used during the Ukraine war, and it signals that, for now, the authorities are choosing to shape dem
RBI Asks State Refiners to Curb Spot Dollar Buying and Tap SBI Credit Line to Steady Rupee
The rupee is Asia's worst-performing major currency this year
Mark
Why does it matter that refiners are being nudged away from the spot market?
Mimi
Because they buy dollars every day to pay for crude. If that demand moves to a credit line, there's less dollar buying pushing the rupee down.
Mark
Which companies are involved?
Mimi
Indian Oil, Hindustan Petroleum and Bharat Petroleum. Together they control about half of India's 5.2 million barrels a day of refining capacity.
Luke
Worth saying that all of this rests on three anonymous sources. Neither the RBI nor SBI has commented, and the refiners didn't respond.
Mark
So it's not officially confirmed?
Luke
Right. It's reported, not announced. Even the detail that refiners can choose between the reference rate and the credit line comes from a single source.
Mimi
The traders offer some support. Three of them said they'd seen refiners less active in spot recently, though they called it anecdotal.
Luke
And anecdotal is the key word. Nobody has given a figure for how much dollar demand has actually shifted.
Mark
Can we say this is why the rupee recovered?
Luke
Not cleanly. It's up about 2% from its low to 93.20, but the RBI has also sold reserves, curbed arbitrage and barred NDF offerings. The reporting doesn't separate out each step's effect.
Mimi
What we can say is the measures have been in place about two weeks and the rupee has strengthened over that period.
Der Puls
- The rupee plunged past 95 to the dollar in March, an all-time low, as oil surged and foreign investors fled.
- Refiners, among the largest buyers of dollars to pay for imported crude, have been quietly asked to stop buying in the spot market.
- The central bank is routing oil-company demand through a State Bank of India credit line, so dollar purchases are funneled through one institution.
- Arbitrage trades have been clamped down on, non-deliverable forwards barred, and reserves sold to hold the currency up.
- The rupee has clawed back about 2%, quoted at 93.20, but its fate now hinges on whether oil prices stay elevated.
In the quiet machinery that keeps a nation's money steady, India's central bank has reportedly asked its state-run oil refiners to step back from the open dollar market and draw instead on a special credit line through the country's largest state-backed lender. The request answers a familiar strain: when the price of oil climbs and foreign investors pull money out, a currency weakens, and the rupee had sunk past 95 to the dollar in March as fears of the Iran war spread. The move echoes a tactic used during the Ukraine war, and it signals that, for now, the authorities are choosing to shape demand rather than simply watch the currency fall. Whether this calm can outlast high oil prices remains the open question.
India's central bank has asked the country's state-run oil refiners to hold off buying dollars in the open market and to tap a special credit line instead, according to three sources who spoke to Reuters. The request revives a tool first used during the Ukraine war, when the rupee was under similar pressure.
The strain is visible in the currency's record. Soaring oil prices and heavy selling by foreign portfolio investors pushed the rupee down more than 3% this year, making it the weakest performer among Asia's major currencies. In late March, worries about the Iran war spilling over sent it past 95 to the dollar, an all-time low.
Refiners matter because they are among the biggest dollar buyers, needed to pay for imported crude. If they draw on the credit facility through State Bank of India, their demand in the open market falls and the rupee gets relief. Indian Oil, Hindustan Petroleum and Bharat Petroleum are eligible, and together they control about half of India's refining capacity. Sources said the daily purchases are also being routed through SBI rather than spread across several banks, which can soften the market's impact.
The measures have been in place for about two weeks. Neither the central bank, SBI, nor the refiners have publicly confirmed them, and three spot traders reported a recent drop in oil companies' spot activity. The rupee has recovered roughly 2% and was quoted at 93.20 on Thursday. Whether these crisis-era steps can hold it steady if oil stays high is the question now.
India's central bank has asked the country's state-run oil refiners to hold back on buying dollars in the spot market and to draw instead on a special credit line for their foreign exchange needs. Three sources told Reuters about the request. The step revives a tool used earlier in the Ukraine war, when the rupee was also under strain.
The pressure behind it is plain in the currency's numbers. A surge in oil prices and heavy outflows by foreign portfolio investors have pushed the rupee down by more than 3% this year to record lows, making it the worst performer among Asia's major currencies. In late March, concerns about spillovers from the Iran war drove it past 95 to the dollar, an all-time low.
Refiners matter because they are among the biggest buyers of dollars in the market, needed to pay for imported crude. The logic, according to two of the sources, is that if refiners use the credit facility, their demand for dollars falls and the rupee gets some relief. The facility is open to Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp, which together control about half of India's 5.2 million barrels per day of refining capacity.
The refiners have been asked to reach the credit line through the State Bank of India, the country's largest bank and a state-backed one. One source said they are also being encouraged to send their daily dollar purchases through SBI rather than spreading them across several banks. Since SBI already handles sizeable merchant flows, that person said, funneling oil-related demand through one institution can reduce the overall impact on the market. A second source described the choice as two routes: buy dollars at the RBI reference rate, or draw on the credit line.
The sources said the arrangements have been in place for about two weeks. All three declined to be named because they are not authorised to speak to the media. The RBI and SBI did not immediately respond to emailed requests for comment, and none of the refiners replied either. Three spot FX traders, separate from the sources, said they had noticed an anecdotal decline in oil companies' spot market activity in recent days.
This is one measure among several. The RBI has clamped down on arbitrage trades that it said worsened market volatility, and it has barred Indian banks from offering corporates non-deliverable forward contracts. It has also sold dollars from its foreign exchange reserves to support the currency.
The rupee has responded. It has recovered about 2% from its record low and was last quoted at 93.20 per dollar on Thursday. What to watch now is whether these crisis-era measures, the reserve sales and the curbs on arbitrage can keep the currency steady if oil prices stay high.
Bemerkenswerte Zitate
Funneling oil-related FX demand through SBI can help reduce the overall market impact, since SBI already handles sizeable merchant flows (paraphrased).— One of three anonymous sources, via Reuters
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