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Banks Stop Lending to Indian Oil Refiners

Rediff.com, Posted: Oct 13, 2008

NEW DELHI -- India's three state-owned oil refiners arent receiving cash from commercial banks due to the industry-wide liquidity crunch. These companies have accumulated big debts because they sell petroleum products below production cost, the web-based news service, Rediff.com reports.
Oil companies raise their money from both foreign and domestic banks. They also spend their rupees to buy dollars from the money market. They typically require around $1 billion a week (at the current crude oil price of around $90 a barrel) to meet the country's oil import requirements. India imports over 70 percent of its oil needs.
Now these companies are finding access to funds almost impossible. "Domestic banks have stopped lending to us," said a senior Indian Oil Corporation official on condition of anonymity. "We can still buy dollars from the market provided we have the money to buy them," he added.
Banks, however, also stopped dollar loans to the oil marketing companies a month ago, the IOC official added. An executive from Bharat Petroleum, India's second-largest importer, confirmed this.


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