FIEO wants banks to share losses on derivatives

MUMBAI: The Reserve Bank should ask banks to share up to 50 per cent of the losses suffered by exporters on derivative contracts they have entered to hedge against the fluctuation in foreign exchange rate, exporters' organisation FIEO said on Thursday.

RBI may consider issuing directive to banks to settle losses on 50:50 basis, FIEO President A Sakthivel said in a statement, and also pointed out that many derivative contracts entered into by banks with exporters were in contravention of RBI guidelines.

FIEO chief made this suggestion at a meeting today with the RBI governor D Subbarao. The exporters have collectively lost a whopping Rs 2000 crore on derivatives contracts, he said.

FIEO chief also suggested that bank should consider interest subvention (grant or relief) to sectors like tea, basic chemicals, engineering goods and jute among others.

The subvention is necessary as overseas markets have become extremely competitive and current interest rate of 9 per cent is proving to be a stumbling block, he said.