Rupee Depreciation Check.. RBI Takes Key Decision

The Reserve Bank of India (RBI) has announced a key measure to contain the depreciation of the Indian rupee. The central bank will introduce a special dollar window for public sector oil marketing companies (OMCs), reducing their dependence on the spot market for purchasing dollars needed for crude oil imports. The facility will become operational on the 12th of this month. Under the arrangement, the RBI will sell dollars to OMCs through designated banks.

Crude oil accounts for approximately 25% of India's total imports, creating substantial demand for US dollars. Public sector oil companies regularly purchase large quantities of dollars in the spot market to pay for crude oil imports, adding pressure on the rupee and contributing to sharp exchange-rate fluctuations. Through the special dollar window, the RBI aims to ease this demand in the spot market, reduce pressure on the domestic currency and promote greater stability in the foreign exchange market.