RBI directs banks to monitor unhedged FX exposures

MUMBAI: The Reserve Bank of India has asked banks to put in place systems to monitor unhedged foreign currency exposures of corporates. Unhedged foreign currency exposures of corporates, which is a source of risk to them as well as to the financing banks and the financial system, we are advising banks to put in place a proper mechanism to rigorously evaluate the risks arising out of unhedged foreign currency exposures of corporates, and price them in the credit risk premium,'' said the RBI governor D Subbarao.

Banks are also being advised to consider stipulating a limit on the unhedged position of corporates on the basis of bank's Board-approved policy,'' he said.

The Rupee has depreciated by around 4% in October 2012.

Banks would have to submit a compliance or action taken reports to the Reserve Bank before end-December 2012 after obtaining the approval of their Board of Directors