Importers pull back from forex hedging as forward premiums surge after RBI measures

Importers are reducing their use of foreign exchange hedging due to rising costs. This is happening after the Reserve Bank of India (RBI) implemented measures that have caused forward premiums to surge to 8-8.5 percent. As a result, importers are facing higher hedging costs and thinner liquidity, making it more expensive for them to manage their foreign exchange risks. This could impact India's trade and economy, particularly for companies that rely heavily on imports.

Why it matters

The RBI's measures have led to a surge in forward premiums, making hedging more expensive for importers. This increased cost may reduce their appetite for foreign exchange, affecting their business operations.

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