Easing ECB norms for oil firms may not arrest rupee slide, says Bank of America Merrill Lynch

Mumbai: Liberalising foreign borrowings for oil companies to raise to $10 billion will not have a “material” impact on arresting the slide of the rupee, Bank of America Merrill Lynch (BofAML) said on Thursday. The government’s earlier moves like tariff hikes on non-essential items were also “not significant either”, the American brokerage said in a note. “Liberalisation of public sector undertaking oilco ECBs (external commercial borrowings) up to $10 billion is not very material,” it said. The move announced on Wednesday evening will be partly offset by their reducing short-term forex credit, which it estimated at $15 billion during the fiscal. [caption id=“attachment_5131081” align=“alignleft” width=“380”] Representational image.[/caption] The RBI “cannot afford” opening a special swap window for oil importers as is being speculated, it said. The brokerage explained that pre-committing $8 billion a month for it over and above the $25-30 billion lost in interventions since April will push the overall forex reserves below the critical eight-month import cover mark. It can be noted that a such a window was last opened in August 2013, during the last episode of a slide in rupee. It was followed up with an NRI bonds issue, which successfully arrested the slide as the diaspora put in $26 billion. The brokerage voted for a similar move this time around as well to help the rupee. It said $30-35 billion can be raised through a similar programme and stressed that it is better than a rate hike by the RBI or restrictions on gold imports. The rupee closed at a new low of 73.34 against the US dollar Wednesday, after brent breached the $86-per-barrel mark. The domestic currency has shed over 12 percent this year to be one of the worst performing currencies in the world.