- Banks tighten access to forward dollar hedges after RBI curbs
- Hedging costs could rise 80-150 basis points for importer clients, bankers say
- Corporate forward dollar purchases hit record $77 billion in September
- Rupee fell over 7% in 2026 before Monday's rebound
MUMBAI, Oct 12 (Reuters) - Banks turned cautious about offering forward dollar hedges to importers on Monday after the Reserve Bank of India's latest forex measures sharply raised costs and are expected to slow a hedging surge that had dragged the currency, bankers said.
The RBI's requirement that banks set aside cash equivalent to 20% of the notional value of foreign-exchange derivative contracts used to hedge current-account transactions ties up funds and raises effective costs.
The move aims to curb corporate demand for dollars, which has pressured the rupee, compounding strain from high oil prices, persistent capital outflows and rising global bond yields.
Following the measures, some lenders have become more selective in offering forward dollar contracts to importers and are focusing on larger corporate clients, two bankers at large foreign banks said.
A treasury executive said it has its predominantly importer clientele wait "a day or two" while continuing to service exporter clients.
Meanwhile, a banker at a mid-sized private-sector lender said the bank was charging an additional fee, expressed in paisa per dollar per month, depending on the contract size. Most importers that his bank dealt with continued to opt for near-month contracts despite the higher costs, he said.
Grappling with the changes, Banks have urged the RBI to replace the 20% cash deposit rule with a direct charge on importers' forward dollar purchases, saying the rule ties up liquidity and raises costs, Reuters reported on Monday.
The recent measures could increase hedging costs by 80 to 150 basis points, depending on how much banks pass on to clients, the bankers said, requesting anonymity because they were not authorized to speak to the media.
Corporate purchases of forward dollars rose to a record $77 billion in September, up 80% from a year earlier, while corresponding sales were $41 billion, according to clearing-house data.
Bankers said the measures also aim to curb speculative activity by making it harder for companies to repeatedly cancel and rebook contracts and by increasing compliance requirements for hedging transactions.
The rupee, down more than 7% in 2026 before rebounding 1% on Monday, neared its record low of 96.96 per dollar last week despite $140 billion raised through special dollar-deposit schemes and higher interest rates.
Three of the bankers cited earlier also said that they had temporarily suspended access to online platforms for such hedging transactions while assessing documentation and compliance requirements arising from the RBI's latest measures.
'BURNT THE MIDNIGHT OIL'
The RBI's curbs caught market participants off guard, prompting a flurry of calls and meetings between treasury officials and corporate clients over the weekend, three bankers said.
"Bankers burnt the midnight oil after the measures. It appears the RBI did too," a foreign-exchange salesperson at a large global lender said.
Beyond tightening curbs on corporate dollar demand, the RBI has sought to temper pressure on the rupee by allowing oil marketing companies to buy dollars directly from the central bank through a special window.
BofA Global Research said in a note that the measures should aid the rupee and curb speculation, though other analysts warn the effect may fade unless import costs and capital outflows ease.
Reporting by Nimesh Vora, Jaspreet Kalra; Editing by Rashmi Aich
Source: Reuters