India’s central bank has reportedly asked state-run oil refiners to reduce their direct dollar purchases from the spot market and instead use a special credit facility to manage their foreign exchange needs, according to sources familiar with the matter.
The move by the Reserve Bank of India comes as the country faces renewed pressure on its currency due to rising global oil prices and strong foreign investor outflows. The Indian rupee has recently fallen to record lows, making it one of Asia’s weakest-performing major currencies in 2026.
State-owned refiners, which are among the largest buyers of US dollars in India due to massive crude oil imports, have been encouraged to rely more on a credit line arranged through State Bank of India. The idea is to reduce sudden demand for dollars in the spot market, which can put pressure on the rupee.
The refiners involved in the arrangement include major state companies such as Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation. Together, they control nearly half of India’s refining capacity and regularly require large volumes of foreign currency to pay for oil imports.
Sources said the central bank’s guidance is aimed at stabilising currency flows rather than restricting oil purchases. By shifting transactions away from the open market and into structured credit channels, authorities hope to smooth out demand for dollars and reduce volatility in the rupee.
Under the system, refiners can either purchase dollars at the central bank’s reference rate or use the credit facility provided through the banking system. This approach is similar to measures used in previous periods of financial stress, including during the global energy shock caused by the Ukraine conflict.
Market participants say the move appears to already be affecting trading activity. Some foreign exchange dealers have noticed a decline in spot dollar demand from oil companies in recent days, suggesting that refiners are gradually adjusting their buying patterns.
The rupee has been under pressure due to a combination of factors, including higher crude oil prices, global uncertainty linked to geopolitical tensions, and reduced capital inflows from foreign investors. At one point, the currency slipped beyond 95 per US dollar before recovering slightly after central bank intervention.
In response to growing volatility, the Reserve Bank of India has taken several additional steps to support the currency. These include tighter rules on certain derivative trades, restrictions on some forward contracts, and direct sales of US dollars from its foreign exchange reserves.
These measures have helped stabilise the rupee in recent weeks. The currency has since recovered part of its earlier losses and was last trading around 93.20 per dollar, according to market data.
Officials have not publicly commented on the latest directive, and both the central bank and State Bank of India have not confirmed details of the arrangement. However, sources say the policy has been in place for around two weeks and is being closely monitored.
Analysts say the approach reflects India’s ongoing effort to balance energy import needs with currency stability. As a major oil importer, India is particularly sensitive to fluctuations in global crude prices, which directly affect dollar demand and pressure the rupee.
For now, the focus remains on managing volatility while ensuring that oil refiners continue to have smooth access to foreign exchange for essential imports.
0 Comments