Oil firms to follow RBI order to buy $ from single PSB

The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) have finally swung into action to salvage the battered rupee by announcing a host of measures,including curbs on currency speculation and dollar purchases by oil companies. The rupee which plunged to a record 61.21 per dollar on Monday over concerns that the US will cut stimulus that boosted dollar supply,bounced back to close at 60.14 on Tuesday,a gain of 0.78% from Monday’s close of 60.61. State-owned oil marketing companies,who are the biggest buyers of US dollars,on Tuesday agreed to implement the RBI order to purchase their dollar requirement from a single public sector bank so as to curb volatility in the rupee. The decision follows a meeting between RBI and oil firms on Monday. Indian Oil Corporation will buy its monthly requirement of $3.8-4 billion dollars from State Bank of India. Similarly,BPCL,HPCL and MRPL will buy their dollar requirement from a single bank,sources told agencies on Tuesday. In another development,the RBI,in a late Monday night circular,barred banks from proprietary trading in currency futures and exchange-traded options. In other words,any transaction by the banks in these markets will have to be necessarily on behalf of their clients and they are barred from entering into any deal on their own. Simultaneously,Sebi,which monitors the currency futures market,said it will raise margin requirements and cap open positions in such contracts. Sebi,in a circular issued late Monday,said that it is reducing the exposure that brokers and their clients can take on currency derivatives and also doubled their margins on dollar-rupee contracts. The exposure to all currency contracts for a broker has been capped at 15% of overall exposure or $50 million,whichever is lower. For clients,this cap would be 6%,or $10 million. The regulator said that the new norms would be applicable with effect from July 11.