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Mumbai, May 30 The Reserve Bank of India will now conduct open market operations in the secondary market for oil bonds held by public sector oil marketing companies. For public sector oil companies scorched by the rising crude prices, the special market operations would improve their access to domestic liquidity and alleviate the lumpy demand in the foreign exchange market in the current extraordinary situation, said the apex bank.

The RBI will conduct open market operations (outright or repo at the discretion of the RBI) in the secondary market through designated banks in oil bonds, held by public sector oil marketing companies in their own accounts. This will be subject to an overall ceiling of Rs 1,000 crore on any single day. Oil companies will also be provided equivalent foreign exchange through designated banks at market exchange rates.

“Liquidity and other related issues, currently faced by these entities, arising from the unprecedented escalation in international crude prices have systemic implications for the smooth functioning of financial markets and for overall financial stability. It has, therefore, become necessary for the RBI to put in place special market operations on an ad hoc basis so as to minimise potential adverse consequences for financial markets in a transparent manner,” said the RBI in a press release.

In the past one month, the rupee has significantly depreciated against the dollar on account of huge demand for dollars from oil companies.

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