India Eases Borrowing Norms for Oil Refiners to Prop Up Rupee
(Bloomberg) -- India’s central bank eased norms for state-run refiners to borrow money from overseas markets, in a bid to support the rupee by stemming dollar demand from oil importers.
The Reserve Bank of India removed a $750-million cap each on state-run refiners including Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. for borrowing overseas under the so-called automatic route, subject to an overall limit of $10 billion, according to a statement. The RBI also waived off mandatory hedging requirements on the borrowings.
The easing of norms that will help take a sizable amount of dollar demand from oil refiners off the local market came on a day when rupee, the worst-performing currency in Asia, breached 73-level to a dollar. Indian refiners pay for crude oil in dollars and spent about $88 billion in the year ended March 31 on imports.
Weighing on the rupee are rising oil prices and a current account deficit that makes India dependent of foreign inflows. Measures by the central bank and government -- including raising tariffs and easing overseas borrowing norms -- have as yet failed to revive the confidence of investors amid a rout in emerging markets triggered by rising U.S. interest rates and a stronger dollar.
The rupee fell to the lowest level on record to 73.42 on Wednesday, before closing at 73.34, taking this year’s drop to about 13 percent. The new borrowing facility will come into effect from Oct. 3, the RBI said. The loans would have a minimum average maturity of three to five years.
India, which imports more than 80 percent of its oil needs and is the fastest growing oil consumer, is vulnerable to increasing crude prices. Price of Brent crude have climbed to more than $85 a barrel and is trading near the highest level since 2014.
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