RBI Relaxed Borrowing Policy for Oil Companies to Take Long Term Working Capital Loans From Foreign Banks

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The Reserve Bank of India (RBI) relaxed policy on borrowing from overseas to allow State-owned fuel retailers to raise up to $10 billion external debt for working capital needs.

Till now oil marketing companies were not allowed to raise external commercial borrowing (ECB) for working capital needs on a long-term basis. They could raise a maximum of one-year overseas loan by way of buyers credit, repay it within 12 months and raise it again thereafter.

Now, the RBI has allowed them to raise ECB of minimum maturity of 3 or 5 years.

The move comes at a time when international oil prices have hit four-year high of near $85 per barrel and the rupee plummeted to close at an all-time low of Rs 73.34 to a US dollar.

Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) will be allowed to raise overseas funds with a minimum average maturity period of 3 or 5 years under the automatic route.

The RBI also lifted the individual borrowing limit set at $750 million under the external commercial borrowing (ECB) framework.

With oil prices climbing to four-year high and the rupee plunging to new lows, imports have come costlier. Oil companies now need a higher working capacity to meet their monthly import requirements.

India is 81 per cent dependent on imports to meet its oil needs.

“Public Sector Oil Marketing Companies will raise $10 billion for 3-5 year for financing their permanent working capital. RBI has also granted necessary exemptions under the ECB policy,” Economic Affairs Secretary Subhash Chandra Garg said in a tweet.

Separately, the RBI said the overall ceiling for such external commercial borrowings will be $10 billion equivalent and the said facility will come into effect from the date of the circular.

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  1. Till now oil advertising and marketing groups had been now not allowed to raise external business borrowing (ecb) for running capital wishes on a protracted-time period foundation. They might boost a most of one-year overseas loan by using manner of consumers credit, pay off it within twelve months and lift it again thereafter. VIEW MORE :

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