/>

RBI eases ECB hedging norms for companies

Raising foreign funds to turn cheaper

Published - November 26, 2018 10:45 pm IST - Mumbai

Flat style illustration design of an arm giving bag of money to the other.

Flat style illustration design of an arm giving bag of money to the other.

The Reserve Bank of India (RBI) has eased hedging norms for companies that raise funds through external commercial borrowings (ECB), a move that will lower the cost of hedging.

A notification issued by the central bank said mandatory hedge coverage has been reduced from 100% to 70% under Track I of the ECB framework.

Roll-over

The RBI also clarified that the ECBs raised prior to this circular would be required to mandatorily roll over their existing hedge only to the extent of 70% of outstanding ECB exposure.

According to the RBI, Track I refers to medium-term foreign currency-denominated ECBs with a minimum average maturity of 3-5 years. The move will help reduce costs for companies that raise foreign funds.

“The cost of hedging has gone up in the last six months with the strengthening of the dollar. As a result, the ECB route was becoming unattractive to firms,” said a banker.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.