The currency fluctuations in the global exchange rate movements have adversely affected the viability of exports. It has put extraordinary pressure on the topline as well as bottom line of the exporters across the country including Tiruppur, Ludhiana etc where the majority of the exports are in terms of US dollar.
The All India Forex Derivative Consumer Forum led by the president Raja M Shanmugam,who is also the managing partner Warsaw International, Tiruppur has expressed concerns on the challenges faced by the Indian exporters due to the loss arising out of the forex derivative contracts. Banks, mostly private and foreign, approached the exporters with an assurance that these derivative products shall mitigate these trying circumstances and is used as a mechanism world over to counter such exchange gyrations. It may be pointed out that the exporters laid their absolute faith on the banks in carrying out these transactions as they regarded the banks as sentinels of trust and expertise.
Nevertheless, the risk involved in these transactions and suitability to the business concerned, most of whom were neither schooled in this high world of financial derivatives nor were familiar in such transactions, was were never explained to the exporters. Consequently, the exporters were exposed to enormous risk and currency downsides.
Further, when these products were subjected to greater scrutiny by professionals it was also found that the derivative products sold by the banks violated some of the basic RBI guidelines. Some of these have acquired the character of mere speculative contracts that have exposed the exporters to sheer wagering on forex rates rather than hedging against the Forex risks inherent in their business.