OMCs sourcing dollars from market, RBI mulls swap window

State-run oil marketing companies were now sourcing their entire dollar demand in markets, while the Reserve Bank of India would consider re-opening a special swap window on days of strong dollar demand, the central bank said Monday.

"Beginning last week, the public Sector oil marketing companies (OMCs) have started accessing the FX market for their entire daily dollar demands," the RBI said here in a release.

The cenrtal bank added it would consider re-opening a special swap window on "rare days when there is a pronounced spurt in dollar demand in the FX market."

The RBI said it has also advised OMCs to smoothen their daily dollar demand so that upcoming bunched up demand was covered in advance in forward markets or on days with low dollar demand.

Oil refiners are the single largest purchasers of dollars in the market.

The RBI had opened a special forex swap window for oil marketing companies in August, providing dollars via a forward swap agreement to reduce pressures on the rupee.

Traders have been apprehensive about a surge in dollar demand from oil firms wanting to repay their swap agreements.

The RBI also said it would keep all options open regarding the settlement of the swaps, including the option of rupee settlements.

The central bank said it has received $34 billion under its two forex swap windows.

"Since the RBI swap windows are now closed, going forward, any new funds raised from FCNR (foreign currency non-resident) deposits or from banks' borrowings will flow directly into the market instead of to RBI's FX reserves," the statement added.