The Reserve Bank of India (RBI) is set to ask state-run oil companies to centralise their dollar purchases in a single public sector bank.
The move to end speculation in the rupee caused by competitive quotes taken from multiple banks was finalised in a meeting held at the finance ministry last week.
Oil marketing companies (OMCs) now seek multiple quotes for their dollar requirements, estimated at $8-8.5 billion every month.
A petroleum ministry official said based on a meeting held at the finance ministry last week, it was communicated to RBI that OMCs can buy dollars at a designated reference rate from a single bank. "The finance ministry and the petroleum ministry believe it would be better to buy this way, rather than buying by quotations in the present situation. It's not specified to any particular bank," he said.
Following the suggestion, RBI had met officials of Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation in Mumbai on Monday. "In our presentation, we had made various suggestions, including a special window for OMCs to access dollars at market rates and also buying it from a single bank. However, no written directive has come from RBI," said a senior official of an OMC.
IndianOil, the nation's largest refiner, is likely to buy its monthly requirement of $3.8-4 billion from its official banker, State Bank of India. Hindustan Petroleum and Bharat Petroleum will buy their dollar requirements from a single bank.
The chief currency dealer with a mid-sized public sector bank said this was a major move. "The rupee will strengthen tomorrow due to this. I expect the rupee to open at 59.60-59.65 against the dollar tomorrow and during the day, it will trade in the range of 59.20-60.20," he added.
The rupee rallied on Tuesday - it closed stronger at 60.15 a dollar against the previous day's close of 60.62 - from a record low in the previous session after RBI and the Securities and Exchange Board of India (Sebi) restricted speculative trading in currency derivatives.
Late on Monday, RBI banned banks from proprietary trading in domestic currency futures and options, while Sebi doubled the margin requirement on the domestic dollar-rupee forward trade. Sebi also capped the gross open positions of a trader across all contracts to six per cent of the total open interest or $10 million, whichever is lower.
Further, for a trading member which is not a bank, it capped the open position to 15 per cent or $50 million. All the changes, the market regulator said, would be effective from Thursday.
The National Stock Exchange later clarified that clients with excess open positions in currency derivatives will have until July 30 to cut these to levels mandated by the regulators.
G Ananth Narayan, head of global markets, South Asia, Standard Chartered Bank, said Sebi's action would impact sentimentally and that too only in the short term. "It shows that the authorities are taking some action to try and control volatility. Direct impact will be in the short term, not so much in the medium term," he added.
The six-month forward dollar premium ended at 5.95 per cent on Tuesday against the previous close of 5.86 per cent. Dealers said this was just a marginal rise and in the next few days it would fall, as exporters would sell forward dollar contracts anticipating the rupee's appreciation in the next few days.