Unhedged foreign exchange exposure a risk: RBI

The Reserve Bank of India (RBI) Tuesday cautioned companies over their unhedged foreign exchange exposure as a risk to the country's economic and financial stability.

"Unhedged exposures are not only a threat to individual companies, but are also a threat to the system and the system stability," RBI deputy governor H.R. Khan said on the sidelines of an industry event here.

An unhedged foreign exchange exposure leaves the investors at the risk of currency fluctuations.

Khan, however, assured that the RBI would not "micro-manage" firms' hedging strategies.

"We will certainly not like to micro-manage what is otherwise a commercial decision," he said.

On the country's forex reserves reaching a record high of $330 billion, Khan said there should be no complacency as no amount of reserves may be enough to fight extreme volatility.

"Foreign currency reserves have improved. Right now, we're at $330 billion, highest ever. But there is also a view that no amount of foreign exchange reserves can cushion when there is extreme volatility,"he said.

Khan added that macro-economic vulnerabilities for the country's economy have significantly receded due to the high growth, contained current account deficit, lower inflation and high forex reserves.