India's central bank is encouraging state-run refiners to reduce dollar buying in the spot market to contain a sharp fall in the rupee, two sources said, adding they have been asked to lean on a special credit line instead.
The Reserve Bank of India has ensured $9 billion has been made available at overseas branches of some Indian banks for the country's three state-run refiners to tap, said the sources who have direct knowledge of the matter, adding that the funds are available at market rates.
"Since last 2-3 days RBI has been asking companies to tap this credit line," one of the sources said.
The credit line is available only for Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp , which together control more than half of India's 5 million barrels per day refining capacity.
Monthly oil purchases from overseas account for about 30% of India's overall imports.
Banks participating in the credit-line scheme include the State Bank of India, Canara Bank, Bank of Baroda, Axis Bank and Punjab National Bank, said one of the sources.The greenback's surge amid sharp interest rate hikes from the U.S. Federal Reserve has sent the Indian currency tumbling 10% so far this year. India's central bank has also intervened with dollar sales to help prop up the currency.
The sources declined to be identified as the discussions were private. The RBI, the state-run refiners and the lenders did not respond to requests for comment.
The rupee strengthened following the Reuters report to a day's high of 81.16 per dollar from 81.54 prior to the report.