RBI asks oil refiners to curb dollar buys, aid rupee

Rupee pressure brings back crisis-era steps

India’s central bank has urged state-run oil refiners to curb spot dollar purchases and use a special credit line to meet foreign exchange needs, according to three sources cited by Reuters on April 16. The step revives measures used earlier during the Ukraine war period to reduce pressure on the rupee. The Indian currency has been hit by a combination of higher oil prices and heavy foreign portfolio outflows. Reuters reported the rupee has fallen more than 3% to record lows this year, making it Asia’s worst-performing major currency. Because refiners are among the biggest buyers of dollars to pay for crude imports, even incremental changes in their buying patterns can influence near-term market liquidity. The move signals the central bank’s focus on managing dollar demand rather than only intervening through market operations.

What the RBI asked refiners to do

The central bank’s message to refiners, as described by the sources, is primarily about reducing spot-market dollar demand. The sources said refiners were asked to tap a special credit facility instead of buying dollars directly in the market. Reuters also reported that the refiners were encouraged to route daily dollar purchases through State Bank of India (SBI) rather than spreading them across multiple banks. One source said concentrating oil-related flows through SBI could reduce the overall market impact because SBI already handles sizeable merchant flows. Another source said refiners can either buy dollars at the RBI reference rate or draw on the credit line for their foreign exchange needs. The idea is to smooth the market’s demand profile without stopping refiners from meeting payment obligations.

Why refiners matter in the dollar market

Oil import payments are a large, recurring component of India’s foreign currency demand, making refiners structurally important participants in the rupee-dollar market. When crude prices rise, refiners typically need more dollars for the same volume of imports. Reuters linked the renewed measures to the recent surge in oil prices and to pressure connected to the Iran war. In periods of elevated volatility, concentrated spot buying from a handful of large importers can amplify intraday currency swings. Shifting demand to a credit line and reference-rate purchases can help reduce the visibility and timing concentration of spot demand.

SBI’s role and how the credit line works

Reuters said state-run refiners have been asked to access the credit line via SBI, India’s largest state-backed bank. By design, this channel centralises a large share of oil-related foreign exchange activity through a single bank. The sources told Reuters this could lessen the “overall market impact” when compared with dispersing purchases across several banks. Refiners, as described, have flexibility: they can purchase dollars at the RBI reference rate or use the credit facility. RBI and SBI did not immediately respond to Reuters’ emailed requests for comment. The three sources Reuters cited requested anonymity because they were not authorised to speak to media.

Which companies are covered

The credit line is available to Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL), Reuters reported. Together, the three companies control about half of India’s 5.2 million barrels per day of refining capacity. That scale is why their day-to-day forex activity is closely watched by currency market participants. Reuters also noted HPCL’s operations span refining, transportation and distribution of petroleum products. While the report focuses on state-run refiners, the broader implication is that policy tools can be targeted at large repeat buyers of dollars.

A parallel push: rupee payments for Persian Gulf oil

Separately, another report included in the provided text said the RBI asked major state-owned refiners to press Persian Gulf suppliers to accept at least 10% of oil payments in rupees in the next financial year. Three executives at the processors said the goal is to promote the rupee in international trade and reduce dependence on the dollar. The refiners, according to the executives, have already approached exporters. But the suppliers are pushing back due to currency risk and conversion charges. The executives said the central bank asked refiners to bear part of the currency transaction charges, while refiners are resisting because they say it would erode margins. An RBI spokesperson was not immediately available for comment in that report, and communications staff at the three refiners did not respond to emails.

How long the measures have been in place

Reuters reported the central bank has turned to “crisis-era measures” that sources said have been in place for about two weeks. The earlier reference point was the Ukraine war period, when authorities used similar steps to manage rupee pressure. The timing matters because it suggests the RBI responded after volatility and outflows intensified, rather than waiting for a sustained deterioration. The focus on refiners highlights a preference for administrative and liquidity-management tools aimed at dollar demand, alongside conventional market operations.

Market context mentioned in the supplied text

The supplied text also includes a transcript-like excerpt stating “140 million barrels is not available to the market,” without further attribution or context in the material provided. In the same excerpt, a speaker says “talking to the refiners here it does look like they’ve been asked to reduce purchases,” and links it to US-India trade talks “kind of going ahead.” Because these lines are presented as an excerpt rather than an official statement, they are best read as market chatter rather than confirmed policy guidance. Even so, they align with Reuters’ description of refiners being urged to curb spot dollar buying.

Key facts at a glance

Why this matters for investors and policy watchers

For currency markets, the immediate issue is the timing and concentration of dollar demand from large importers. Centralising flows through SBI and using a dedicated credit line are mechanisms intended to smooth spot demand and reduce market disruption when the rupee is already under pressure from oil prices and portfolio outflows. For refiners, the key operational question is whether transaction costs increase, particularly if they are asked to absorb part of conversion charges for rupee-settled oil trade. For equity investors tracking IOC, BPCL and HPCL, the reports highlight two competing policy priorities: supporting the rupee and maintaining refinery marketing margins. The RBI and the companies did not provide public responses in the material provided, so the next concrete signal will likely come through observed patterns in interbank FX flows and any further official communication.

Conclusion

The RBI’s reported guidance to state-run refiners to reduce spot dollar buying, use an SBI-linked credit facility, and consolidate FX flows marks a return to targeted tools used during earlier periods of stress. In parallel, refiners have been asked to pursue at least 10% rupee-denominated payments for Persian Gulf oil next year, though suppliers and refiners are resisting elements of the cost structure. With the measures described as already in place for about two weeks, markets will watch whether dollar demand from refiners becomes less visible in the spot market and whether any follow-up steps are formally communicated.