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Contents contributed and discussions participated by koyal singh

koyal singh

RBI warns companies, banks on unhedged forex loans - 1 views

Chartered Accountant in New Delhi Tax consultant in India Tax Advisor in India Company Auditor in Delhi TDS Audit in India Stock Audit in India Auditing firms in India Stock Audit Processes in India Top Accountant
started by koyal singh on 11 Apr 15 no follow-up yet
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    Reserve Bank Governor Raghuram Rajan  warned companies against keeping their foreign
    currency exposures unhedged, saying they might face "big risk" in
    case of change in the monetary policy globally. 

    Companies have to recognise that they are taking
    a big risk (by not hedging their forex exposures), especially if monetary
    policy changes around the world," Rajan said at a post-policy media

    He, however, added that RBI was not planning to introduce any
    "draconian measures" to ensure hedging. 

    On firming up of the rupee, the Governor said
    the volatility can happen anytime as RBI is not holding up the rupee at some
    particular level. 

    "That should be clearly communicated to
    companies also. They should have absorbed it by now that our focus is on undue
    increases in volatility, but we are not going to maintain any particular level
    for the rupee," he said. 


    Rajan said companies should take the message in their own

    Deputy Governor H R Khan also acknowledged that
    the unhedged exposures of the corporates poses a risk and overall percentage of
    hedging remains low. 

    On the move to allow domestic companies to raise
    funds through rupee bonds, Rajan said "that would be an alternative to
    borrowing ECBs in dollars and holding it unhedged". 


    In the monetary policy, the RBI said it would allow domestic corporates
    eligible to raise external commercial borrowing (ECBs) to raise funds through
    issuance of rupee bonds to overseas investors. 

    Stating that there has been an addition of USD
    4.6 billion to the ECB outstandings on a net basis between April 2014 and
    January 2015, Rajan said he is not aware of any "substantial explosion in
    the foreign borrowings in the last quarter. 

    "The other factor that one must recognised
    that is we are also trying to improve the extent to which distress is resolved.
    If distress is always resolved with banks taking the hit and promoters not
    going scot-free, there is an incentive sometimes to certain kinds of bets. 

    "They become one way bets if dollar
    strengthens against the rupee the banks take the hit but is the dollar weakens
    the equity holders benefit. So, that also is something that hopefully the
    measures we have taken will try and convince people that kind of negotiation is
    unlikely to happen going forward and the banks are not going to forever taking
    the downside hit when position are left unhedged," he added. 
koyal singh

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    Ruchi Anand & Associates (RAAAS) undertakes TDS Audit in India which is often management's desire to ensure effective compliances with various TDS and International withholding taxes.
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    Brooks consultant offering Payroll services in india ,payroll outsourcing, payroll management services, payroll services for corporate and payroll services for expatriate etc.
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