The Reserve Bank of India would soon be releasing guidelines for banks to come out with a policy on hedging of foreign exchange exposure by their corporate borrowers.
Addressing a press conference on the quarterly monetary policy review on Tuesday, the RBI Governor, Dr D. Subbarao, said, “Banks must have a board decided policy on hedging to foreign exposure. It cannot be left to the corporates to decide. We would be issuing guidelines in the next 10 days, asking banks to get a policy approved by their boards on hedging.”
“Banks are in the process of reporting to us on whether all their loans of over $25 billion are hedged or not,” he added. According to Dr Subbarao, $60 billion is the Indian exposure to banks in Euro zone. “The European situation is disturbing, but not explosive as it seemed during Christmas. We are continually monitoring the exposure of banks and corporates to European debt.”
Non-performing assets
While both the central bank and commercial banks maintained that there was no reason to be stressed over the issue of Non-Performing Assets as of now, the Governor stated that in the next one month, a meeting would be held with 10 major banks to take stock.
“In the next one month, we are having a meeting with 10 large banks to review the NPA situation and see what measures can be taken by central and state governments to keep banking sector profitability intact,” he added.
Mr M.D. Mallya, Chairman and Managing Director, Bank of Baroda and Chairman, Indian Banks' Association, said the overall gross NPAs of the banking system, at 2.66 per cent were not too bad.
Ms Chanda Kochhar, CEO and Managing Director, ICICI Bank, said that even if restructured assets increase, the gross NPA number will not balloon substantially. Also, going by past experience, not all restructured assets become NPAs. A major part of the restructured assets perform according to expectation.