Amid continuous depreciation of Indian rupee against dollar, the Reserve Bank of India (RBI) has relaxed overseas borrowing norms for state-run Oil Marketing Companies (OMCs). The Central Bank eased policy on borrowing from overseas to allow state-owned fuel retailers to raise up to $10 billion external debt for working capital needs. As of now, OMCs 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.
Now, the Central Bank has allowed them to raise ECB of minimum maturity of 3 or 5 years. The move comes at a time when international oil prices have hit four-year high of near $85 per barrel and the rupee plummeted to close at an all-time low of Rs 73.34 to a US dollar on October 3, 2018. The RBI also lifted the individual borrowing limit set at $750 million under the ECB framework.
Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) will be allowed to raise overseas funds with a minimum average maturity period of 3 or 5 years under the automatic route. With oil prices climbing to four-year high and the rupee plunging to new lows, imports have come costlier. Oil companies now need a higher working capacity to meet their monthly import requirements. Besides, India is 81% dependent on imports to meet its oil needs.