The Hindu Business Line : RBI may allow special market operations for oil bonds

Mumbai, Nov. 20 The Reserve Bank of India may restart the special operation market operation (SMO) facility to directly provide dollar liquidity to oil companies, said market participants.

By providing direct access to dollar funding against oil bonds via the SMO facility, RBI will be ensuring that the domestic currency does not come under further pressure in the open market.

RBI is expected to provide dollar liquidity against Rs 22,000 crore worth of oil bonds with oil companies, over the next two months.

Although the price of crude oil has eased in the international market, oil companies are facing pressure on margins due to the depreciation of the rupee. If they access the spot market to buy dollars, it will put further pressure on the rupee and add to the volatility.

The SMO, which was introduced earlier, in May this year, was discontinued after July. In the first quarterly review of the Annual Monetary Policy, RBI said it has purchased oil bonds aggregating Rs 17,655 crore, up to July 11.

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