The Reserve Bank of India (RBI) on Wednesday allowed the oil marketing companies (OMC) to raise External Commercial Borrowings (ECB) from all recognised lenders under the automatic route.

OMCs may raise ECBs for working capital with a minimum average maturity of three to five years.

"It has been decided, in consultation with the government of India, to liberalise the said provision and permit public sector OMCs to raise ECB for working capital purposes with a minimum average maturity period of 3/5 years from all recognised lenders under the automatic route," the RBI said in a circular.

However, the overall ceiling for such ECBs is capped at $10 billion.

Further, the central bank has also waived off the individual limit of $750 million or equivalent and mandatory hedging requirements as per the ECB framework for borrowings under this dispensation.

The RBI's decision came in the backdrop of depreciating rupee and rising oil prices.

RBI's move will help raise money more cheaply and $10 billion limit is more than adequate for oil imports, an oil company source told CNBC-TV18.

Easing of ECB provisions for working capital is a welcome move by the RBI and it will benefit the OMCs in the long run, said Indian Oil Corporation (IOC).

"Doing away with the mandatory hedging is another boost since the loans would be cheaper and also it gives the flexibility to hedge prudently based on market conditions," the company said.

The rupee recovered sharply from record low levels on Wednesday after reports that the government was in talks with RBI for a special dollar swap window with some state-run fuel retailers.

The rupee hit a fresh record low of 73 against the US dollar on Wednesday as steady capital outflows against the backdrop of tumbling local equities, ongoing global trade war concerns and surging oil prices kept forex sentiment under stress.

First Published:Oct 3, 2018 6:38 PM IST