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Seeking to ensure stability in the currency market, Reserve Bank Governor Raghuram Rajan today said the central bank will not hurriedly close a special window for oil marketing companies (OMCs) to buy dollars for crude oil imports.
"We have no intention of rushing this process (of closing the special window for OMCs)," Rajan said at a press conference here.
On August 28, when the rupee touched an all-time low of 68.85 against the dollar, the central bank opened a swap window for state-owned Indian Oil, Bharat Petroleum and Hindustan Petroleum to buy their foreign exchange requirements directly from the RBI.
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The public sector oil companies are the biggest buyers of dollars, requiring USD 8-8.5 billion every month to import an average 7.5 million tonnes of crude oil.
The rupee recovered, boosted also by optimism the US Federal Reserve would delay tapering its bond-buying programme.
Rajan said that as the exchange rate stabilised, the OMCs returned and purchased more dollars from the market, a process that started on October 14.
"Today, a month later, I am glad to report that majority of oil marketing companies' demand for dollars is back on the market," Rajan said. "The market absorbed the additional demand quite smoothly. In fact, participants did not even know it was back until some talk in the Finance Ministry last week."
The rupee gained for the first time in six days today, adding 41 paise to close at 63.30 against the dollar.
"There has been some turmoil in the currency market in the last few days but I have no doubt that once the market calms down, the remaining oil marketing companies demand would be absorbed easily," he said.
Under the swap arrangement, the OMCs have to repay dollars at various dates from February to April 2014, he said.
"We have three ways of managing the repayment. One is, of course, to buy dollars in the market. If exchange market is calmer, this additional demand should be easily absorbed. If it is not calmer, we could roll over some portion of the swap so that they will mature at the calmer time," he said.
Perhaps the easiest option would be to settle the swap by making net payments in rupees, and avoid the need for OMCs to go back to the market for dollars, he said.
"When the time comes, we will choose the most appropriate combination," he said.
