RBI forms panel to improve hedging tool for commodity price risk

Kolkata: Reserve Bank of India is looking to make India Inc immune from commodity price risks, which has been on the rise with higher volume of cross border trade and growing integration of Indian economy with the rest of the world.

The central bank has formed a working group to review the guidelines for hedging of commodity price risk. The panel will be headed by former RBI executive director Chandan Sinha.

RBI said the domestic commodity derivative market in its formative period and underscored the need for making the hedging mechanism of commodity price risk stronger.

"Exposure of Indian entities to commodity price risks has been accentuated by the growing integration of the Indian economy with the rest of the world and rising volumes of cross border trade," RBI said Thursday.

The panel would assess the risks faced by local entities and their hedging requirements, identify the gaps in the existing regulation and suggest a modified framework for hedging commodity price risk overseas.