Even though the Reserve Bank of India (RBI) has allowed oil marketing companies (OMCs) to raise $10 billion overseas, the rupee fall is not likely to be contained, Bank of America Merrill Lynch (BofAML) said Thursday. “Liberalisation of public sector undertaking oilco ECBs (external commercial borrowings) up to USD 10 billion is not very material,” PTI reported citing the global brokerage.
The central bank “ cannot afford” opening up of a special swap window for oil marketing companies as is being speculated, the global brokerage added. The brokerage explained that pre-committing $8 billion a month for it over and above the $25-30 billion lost in interventions since April will push the overall forex reserves below the critical eight-month import cover mark.
The rupee closed at a new low of 73.34 against the US dollar Wednesday, after brent breached the USD 86-per-barrel mark. The domestic currency has shed over 12 percent this year to be one of the worst performing currencies in the world.
Meanwhile, RBI on Wednesday relaxed policy on borrowing from overseas to allow state-owned fuel retailers to raise up to $10 billion external debt for working capital needs. Till now oil marketing companies were not allowed to raise external commercial borrowing (ECB) for working capital needs on a long-term basis. They could raise a maximum of one-year overseas loan by way of buyers credit, repay it within 12 months and raise it again thereafter.