Is hedging mandatory for ECB?

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.

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