Banks told to bear half of exporters' forex losses

NEW DELHI: Exporters may get some relief after being hit by complex foreign exchange derivative instruments and a strong dollar. The commerce department has proposed that banks-which sold the derivative instruments to exporters-should bear half the losses. The committee of secretaries (CoS) on economic crisis is studying the matter.

Speaking to ET, a commerce department official pointed out that many exporters did not fully understand the exotic derivatives products and banks were also responsible for the losses. "We have proposed that losses should be split between the exporter and the bank," the official said.

Last year, when the dollar was weakening vis-a-vis the rupee, exporters hedged their currency risks by entering into forex derivative contracts with banks. These exporters suffered huge losses as the dollar strengthened this year.

The CoS is looking at bailing out the affected exporters. The committee is headed by the Cabinet secretary and includes secretaries of revenue, economic affairs, commerce and finance.

The proposal will be vetted by the apex committee headed by the Prime Minister and implemented thereafter. Some exporters had requested the former finance minister to push for a settlement on a no-profit/no-loss basis.