The Petroleum Ministry has rejected the RBIs advice to state-run oil marketing companies (OMCs) to shift to buying 50 per cent of their dollar purchases from a single state-owned bank.
At a meeting on July 9,ministry officials told the central bank that dollar rates arrived through bids were cheaper and added to gains of at least Rs 3 crore in a days transaction. Non-competitive buying could also raise transparency issues and attract censure from the Comptroller & Auditor General (CAG),they added.
Indias largest buyer of dollars,the OMCs had agreed last June to RBIs instruction to change the dollar purchase process and buy half of the US currency from a single public sector bank,and to reduce the amount they sourced through competitive quotes from multiple banks.
The RBIs reasoning was that seeking dollar quotes from multiple banks gave an exaggerated impression of an OMCs demand,sending a wrong signal to the market that there existed a huge unmet need. This usually ended up strengthening the dollar against the rupee,it argued.
At present,Indian Oil Corp buys 20 per cent of its daily forex from State Bank of India and the remainder through bids from a panel of 16 banks. It invites quotes for a lot of dollars from a set of four banks,with the winner eligible to participate in the next round for the second lot. Bharat Petroleum and Hindustan Petroleum source their entire requirement through competitive bidding.
At the meeting last week,OMC officials explained that rates arrived through bidding were at least 3 paise per dollar cheaper than what was offered by SBI and resulted in a saving of Rs 3 crore on a minimum buy of $10 million. In case of other public sector banks,the gains were nearly 5 paise/dollar. IOC officials pointed out that purchase from a single bank would lack transparency and a logical audit trail. In such cases the bank rate could be compared by CAG with market-driven rates and be seen by some as a financial scam.
OMCs also said they would follow the RBI advice only if it issued a directive absolving them from being hauled up by CAG. However,the RBI team,led by Deputy Governor Subir Gokarn,declined to offer this guarantee.
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RBI: Dollar quotes from multiple banks gave exaggerated impression of demand,strengthened USD against rupee
OMCs: Rates arrived through bidding 3 paise per dollar cheaper than what SBI offers; non-competitive buying could raise transparency issues