Friday, November 2, 2012

Hedging habit

....The Reserve Bank of India’s (RBI) latest directive, asking banks to charge a higher risk premium on loans made to corporates who haven’t hedged their exposures to forex fluctuations should be seen in the above light. More than half of Indian companies’ foreign currency exposures today are totally un-hedged. It is difficult to see how corporates can price their products correctly, so as to ensure a desired level of profitability, if they face uncertainties on their forex-related costs. .....

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