Why in news
- The Reserve Bank of India opened a special dollar-supply window for public sector oil marketing companies (OMCs) to meet dollar requirements amid international crude price surges.
Key terms
Forex Intervention
Action taken by a central bank to buy or sell foreign currency to influence exchange rates.
Oil Marketing Companies
State-owned or private enterprises engaged in refining, importing, and distributing petroleum products.
Spot Exchange Market
Financial market where currencies are traded for immediate delivery.
Foreign Exchange Reserves
Assets held on reserve by a central bank in foreign currencies, gold, and SDRs.
What is the Special Forex Window?
- Direct intervention mechanism where the central bank supplies foreign exchange (US Dollars) directly to state-run oil refiners outside the spot forex market.
- Prevents large, concentrated daily dollar purchases by oil importers from putting sudden downward pressure on the Indian Rupee in the interbank market.
Mechanism and Precedent
- State-owned OMCs purchase greenbacks directly from RBI or designated public sector banks at prevailing swap/market rates.
- Similar specialized swap and direct supply facilities were deployed during major balance-of-payment pressures in 2013 and global energy spikes in 2022.
Why it Matters for Economic Policy
- Insulates the domestic foreign exchange market from lumpy import demand, moderating extreme spot volatility.
- Saves commercial banks' foreign currency assets for broader trade settling while maintaining central bank oversight over major capital drains.
Prelims facts
- Direct foreign exchange intervention by RBI alters net foreign exchange assets without immediate open market operations.
Mains discussion
- Examines central bank tools to manage imported inflation and currency depreciation risks.
Source: The Hindu
Same topic · past papers
UPSC has asked this before
These previous-year questions sit on the same topic. Open one to practise the earlier ask.
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2017 · Q77 · General Studies · 2 marks
Which of the following has/have occurred in India after its liberalization of economic policies in 1991? 1. Share of agriculture in GDP increased enormously. 2. Share of India's exports in world trade increased. 3. FDI inflows increased. 4. India's foreign exchange reserves increased enormously. Select the correct answer using the codes given below: -
2017 · Q81 · General Studies · 2 marks
What is/are the most likely advantages of implementing 'Goods and Services Tax (GST)'? 1. It will replace multiple taxes collected by multiple authorities and will thus create a single market in India. 2. It will drastically reduce the 'Current Account Deficit' of India and will enable it to increase its foreign exchange reserves. 3. It will enormously increase the growth and size of economy of India and will enable it to overtake China in the near future. Select the correct answer using the code given below: -
2024 · Q42 · General Studies · 2 marks
Consider the following statements: 1. In India, Non- Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India. 2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs). 3. In India, Stock Exchanges can offer separate trading platforms for debts. Which of the statements given above is/are correct? -
2021 · Q15 · General Studies · 2 marks
In India, the central bank's function as the 'lender of last resort' usually refers to which of the following? 1. Lending to trade and industry bodies when they fail to borrow from other sources 2. Providing liquidity to the banks having a temporary crisis 3. Lending to governments to finance budgetary deficits Select the correct answer using the code given below -
2020 · Q57 · General Studies · 2 marks
If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? 1. Cut and optimise the Statutory Liquidity Ratio 2. Increase the Marginal Standing Facility Rate 3. Cut the Bank Rate and Repo Rate Select the correct answer using the code given below: