RBI may let SBI hike exposure to Indian Oil

The Reserve Bank of India ( RBI) may allocate special discretionary limit of exposure to the State Bank of India (SBI) for its exposure to Indian Oil Corporation (IOC), the state-run oil company that requires huge funds for oil payments.

The indication follows the discussion held between IOC and the RBI for increasing the exposure limit of the SBI in respect of the oil major; SBI is the banker for IOC.

In fact, the RBI has been in favour of IOC diversifying its borrowing requirements across other banks because it does not want SBI to concentrate its funded exposure to a single company.

Moreover, any special dispensation given to any one company will also set a precedence for others to ask for similar relaxations in future.

IOC, on its part, has essayed to drive the point home that its borrowings carry a sovereign guarantee and it imports oil for the nation.

Besides, the need for relaxing the norms with regard to SBI stems from the fact that no other bank has such a mammoth capital base to sustain IOC's huge borrowing requirements.

The company has opened up fresh lines of credit with other private and foreign banks, but most of them have either already hit the limit or possess too small a capital.