InvestorQ : Why is RBI asking oil refiners to cut down on spot dollar purchases?
Riya Dwivedi made post

Why is RBI asking oil refiners to cut down on spot dollar purchases?

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shrinidhi Rajan answered.
1 month ago
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RBI wants the major PSU oil refiners like IOCL, BPCL and HPCL to reduce their buying of spot dollars to avoid volatility in the Indian rupee. It not only makes the RBI sell spot dollars (depleting its forex reserves), but also is a major reason for the rupee volatility. What the RBI has suggested is that, instead the refiners should be leaning on the special credit line of $9 bn that the RBI has made available at overseas branches of Indian banks.

It must be noted that this special line of credit is only restricted to the PSU oil refining and marketing companies viz. IOCL, HPCL and BPCL. The RBI has been trying to defend the rupee by selling dollars against the spot purchases by the oil companies. However, in the process the RBI forex reserves are down by $110 billion in 2022 from $647 billion to $537 billion. This announcement by the RBI had resulted in strengthening of the rupee on Friday.

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