Rupee Under Pressure as Oil Firms Limit Use of FX Credit Line

India’s state-run oil refiners are making only limited use of a special foreign exchange credit line offered by State Bank of India, reflecting concerns that the rupee may weaken further. The facility, introduced in mid-April, was designed to reduce immediate dollar demand for oil imports. However, refiners fear that a depreciating rupee would increase repayment costs, making the option less attractive. As a result, companies are partially relying on the facility while continuing spot dollar purchases and short-term market borrowings.

The Indian rupee, which had recently recovered to around 92.50 per U.S. dollar after intervention by the Reserve Bank of India, is once again nearing record lows, hovering close to 95. Currency traders attribute the renewed pressure largely to rising oil-related dollar demand, as crude and petroleum imports add an estimated $12–13 billion monthly to India’s import bill. The rupee has declined roughly 2% in recent sessions, mirroring trends seen in other oil-importing Asian economies.

Global oil prices have further compounded the issue, with Brent crude climbing back to around $112.9 per barrel after dipping in April. Market participants note that while refiners’ dollar purchases are a significant factor weighing on the rupee, broader external pressures are also at play. Despite measures aimed at stabilizing the currency, sustained high oil prices and cautious borrowing behavior by refiners continue to challenge the rupee’s outlook.

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