RBI reduces hedging requirements for ECBs of 3-5 years to 70% from 100%

The hedging reduction would help Indian firms borrow funds relatively cheaply as hedging cost added up substantially to the final cost

The Reserve Bank of India (RBI) on Monday reduced hedging requirements for external commercial borrowings (ECBs) of 3-5 years to 70 per cent from 100 per cent.

At the time of rollover of the existing hedges, the mandatory limit would be reduced to 70 per cent automatically, the RBI said in a notification on its website.

The hedging reduction would help Indian companies borrow funds relatively cheaply as hedging cost added up substantially to the final cost.

For example, the hedging cost for one-year borrowings would be around 5 per cent, which adds to the interest rate. If 70 per cent of the