Hedging policy for banks soon

The Reserve Bank of India said it will release guidelines on the hedging policy within 7-10 days to reduce the impact of volatility in currency on banks.

“RBI will come up with policy guidelines relating to hedging in next seven to 10 days, which will ask banks to have a board determined policy on their foreign currency exposure,” RBI Governor D Subbarao said. He, however, said the central bank doesn’t want to mandate hedging for all kinds of foreign currency exposure as it doesn’t want to micro-manage the banks.

“If banks lend to corporates in foreign currency, they shouldn’t have any unhedged exposure except natural hedge,” RBI Deputy Governor Anand Sinha said, adding that RBI wants to protect the balance sheets of banks from any volatility from currency movement.

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