IOC enters call money market

Firm plans to raise Rs 2,000 crore against the bonds to meet its working capital requirements.

Indian Oil Corporation (IOC) has entered the call money market to raise funds, using the Rs 2,320-crore oil bonds issued to it by the government recently as a collateral.

The company plans to raise around Rs 2,000 crore against the bonds to meet its working capital requirements. It would be using the Collateralised Borrowing and Lending Obligation (CBLO) instrument offered by the Clearing Corporation of India Ltd, which would help it to reduce the borrowing cost.

The company will be trading about Rs 200-300 crore daily by using the CBLO instrument. Corporates were earlier not allowed to access the call money market directly. CBLO enables corporates to become members and access this platform by pledging government securities against their borrowing limits and lending it at the call money market rate.

It requires members to open an account with CCIL for depositing securities which are offered as collateral or margin for borrowing and lending of funds.

Indian Oil has been meeting its short-term and long-term fund requirements by raising loans at the Mumbai Inter-Bank Offer Rate which is higher than the call market rates by about 25-40 basis points due to the build-up of margins charged by various banks.

"With the company going in for the CBLO trading system, we will be able to raise cheaper loans directly from the open market," said Indian Oil director (finance) S V Narasimhan.

The government had recently issued special government bonds amounting to Rs 5,762.85 crore to oil companies in order to liquidate the balance payable to these firms from the Oil Pool Account.

Following the dismantling of the administered price mechanism (APM), the Oil Pool Account was also wound up from April 1, 2002.

Indian Oil had received bonds worth Rs 2,320 crore as the last tranche from this account.

The Oil Pool Account was an instrument by which the government used to reimburse the losses incurred by oil marketing companies on selling petroleum products during the days of controlled price regime.

BLACK GOLD

Oil major to use the Collateralised Borrowing and Lending Obligation instrument (CBLO*) offered by the Clearing Corporation of India Ltd

IOC plans to trade about Rs 200-300 crore daily by using the CBLO instrument

IOC till date has been meeting its short-term and long-term fund requirements by raising loans at the Mumbai Inter-Bank Offer Rate

*CBLO enables corporates to become members and access this platform by pledging government securities against their borrowing limits and lending it at the call money market rate

Members need to open an account with CCIL for depositing securities offered as collateral or margin for borrowing and lending of funds