Exporters blame banks for derivative losses

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New Delhi, Oct 7 : Exporters on Tuesday approached a Parliamentary panel with a grievance that they were made to suffer a huge loss of Rs 16,000 crore by banks, which offered them complex financial derivatives last year.

President of the Federation of Indian Export Organisations (FIEO), Ganesh K Gupta, along with a delegation of exporters, made a detailed presentation before the Parliamentary standing committee on finance.

Gupta informed the committee, headed by BJP member and former minister Anant Kumar, that banks, mostly from the private sector, lured exporters into signing deals for exotic derivatives, which they did not understand. While the FIEO estimates put these losses at Rs 16,000 crore, an official put the figure of over Rs 24,000 crore. Most of these agreements were signed between June and December 2007 when the rupee had appreciated by a sharp margin resulting into lower realisations for exporters. While most of the exporters hedged their currency exchange at Rs 40 to a dollar, they lost huge sums when the rupee started declining fast. It has lost over 15% since June 2007.

“Bankers’ contracts with exporters violated the Reserve Bank guidelines and thus cannot be enforced,” Gupta said after his meeting with the standing committee.

Quoting the RBI deputy governor, Shyamala Gopinath, the FIEO chief said the central bank allows only those banks to offer derivatives, which have a credit relationship with them. Gupta is believed to have blamed HDFC, ICICI Bank, ABN Amro, Kotak Mahindra, Yes Bank and SBI for their losses, but no confirmation could be obtained.

India’s exports grew by an impressive 35.1% between April-August, 2008. “This is because of rise in raw material cost,” Gupta said. PTI

He also urged for the continuation of export subsidies, which have stopped since October 1.