Key Moments
- The Reserve Bank of India told state-run refiners to reduce spot USD buying. Instead, they should use a special FX credit line via State Bank of India.
- This tool, first used during the Ukraine war, aims to support the Rupee. The currency has fallen over 3% this year to record lows.
- Indian Oil Corp, Hindustan Petroleum, and Bharat Petroleum can access the facility. Together, they handle about half of India’s refining capacity.
RBI Steps In to Manage USD/INR Pressures
BNY’s Bob Savage reports that the Reserve Bank of India (RBI) has taken action. It told state-owned refiners to scale back spot US Dollar (USD) purchases.
Instead, the RBI directed them to use a dedicated FX credit line. This facility runs through State Bank of India. As a result, refiners can meet their currency needs without adding pressure to the spot market.
This move aims to ease stress on the Rupee. It also helps reduce immediate USD demand from large oil importers.
Reintroduction of Wartime FX Tool
The RBI has revived a tool used during the Ukraine war. At that time, it helped manage currency volatility.
Now, the central bank is using it again. The Rupee remains under pressure and trades near record lows. In fact, it has dropped more than 3% this year.
Moreover, rising oil prices and foreign outflows add to the strain. Therefore, the RBI wants to limit sharp moves in USD/INR. By guiding refiners away from spot markets, it can better control demand.
Refiners Covered by the Special Credit Line
The FX credit line covers three major state-run refiners. These include Indian Oil Corp, Hindustan Petroleum, and Bharat Petroleum.
Together, they account for about half of India’s 5.2 million barrels per day refining capacity. Because of this, their FX activity has a strong impact on USD demand.
Therefore, shifting their buying away from the spot market can help stabilize the currency.
| Company | Type | Access to FX Credit Line | Role in Refining Sector |
|---|---|---|---|
| Indian Oil Corp | State-run refiner | Yes | Major player in ~50% of total capacity |
| Hindustan Petroleum | State-run refiner | Yes | Major player in ~50% of total capacity |
| Bharat Petroleum | State-run refiner | Yes | Major player in ~50% of total capacity |
Objective: Reduce FX Demand and Support the Rupee
The RBI aims to cut USD demand in the spot market. Large oil importers often drive this demand.
By using the SBI facility, refiners can avoid direct market purchases. As a result, pressure on the Rupee may ease.
At the same time, this step addresses rising oil prices and capital outflows. Both factors have weakened the currency.
Overall, the policy targets stability. It seeks to limit volatility and support USD/INR in the near term.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
