The previous ECB framework mandated the hedging requirement of 70 per cent of the ECB exposure for maturity period between three to five years for companies in infrastructure sector, NBFC-IFCs, NBFC-AFCs, Holding Companies and CICs and Housing Finance Companies, regulated by the National Housing Bank, Port Trusts …
What is ler limit?
Loan Equivalent Risk (LER) limit is sanctioned to Corporates for potential fluctuation in the contractual currency of a foreign exchange transaction (forward / option) undertaken over the transaction’s stipulated time period, as determined using the historical volatility of the contractual currency.
What are natural hedges?
A natural hedge is the reduction in risk that can arise from an institution’s normal operating procedures. A company with significant sales in one country holds a natural hedge on its currency risk if it also generates expenses in that currency.
What is natural hedge as per RBI?
A natural hedge is a management strategy that seeks to mitigate risk by investing in assets whose performances are inherently negatively correlated. … For example, if they incur expenses in the same currency that their revenues are generated they will actually reduce their exchange rate risk exposure, naturally.