Bangalore:
Banks have made it compulsory for its customers to have
forward cover for disbursement of foreign currency loans
to corporates in a bid to contain unhedged exposures.
Sources
say several corporates, both medium and large, had availed
of foreign currency non-resident (FCNR) loans in a bid
to restrict their interest liabilities. FCNR is currently
being advanced at rates of around 350 basis points over
the London inter-bank offered rate (Libor).
With
Libor at less than 2 per cent, the costs of these loans
for borrowers worked out to less than 6 per cent. This
is less than half of the costs of borrowing in rupee funds.
The
sources add that most of these corporates had preferred
to keep such exposures unhedged. This was given the rupee's
appreciation against the dollar and euro.
The
rupee has appreciated by at least 6 per cent against the
US dollar during the last one year. Against the euro,
it has firmed up by 9 per cent during the last six months.
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