On top of Wednesday?s series of measures to arrest the rupee?s fall, the Reserve Bank of India has advised companies to take fresh foreign currency exposure only after implementing the hedging policies adopted by their respective boards. An advisory has been sent through banks, said a senior RBI official engaged in forward market development.

Further, according to official sources here, the government and the central bank are also considering making currency hedging mandatory for companies raising funds through external commercial borrowings (ECBs) or foreign currency convertible bonds (FCCBs). Currently, companies follow their own policies in this regard and there are many firms with little or inadequate cover against currency risks. Corporates have raised R1.5 lakh crore ECBs this year.

Sources said that pumping dollars into the market would be counter-productive as it would push up inflation. This signalled that RBI was unlikely to intervene forcefully in the forex market.

The petroleum sector is the hardest hit by currency swings, while software exporters gain significantly. But all exporters are not happy either, as their hedging at higher levels of rupee has become useless after such a sharp crash. ?We have about $5 billion foreign currency loans. There is always some mark-to-market losses,? IndianOil director (finance) PK Goyal told FE.

Currency spikes boost the crude oil import bill and drive up the interest burden of oil marketing companies like IOC, HPCL and BPCL, which rely on cheaper overseas loans when local interest rates rise. Oil importers lose roughly R8,000 crore a year for a depreciation of R1 in the domestic currency.

Though RBI’s direct intervention in the forex market was unlikely, analysts see other measures on cards to stem the rupee’s slide. ?While there is unlikely to be a large (RBI) intervention for fear of eroding reserves, we could see measures to encourage inflows via higher FDI limits, NRI deposits, and dollar swap lines,? Citi India said in a research note.

Petroleum ministry officials said oil companies were not aggressive in their hedging operations as PSUs need government permission to engage in an activity similar to speculation.

Fertiliser is another sector where currency depreciation has severely affected domestic companies.

Companies have passed

on the higher cost of import to farmers, leading to doubling of retail prices of most imported fertilisers in October from the level witnessed in April.

The country?s largest fertilizer cooperative Iffco on Tuesday asked its global suppliers to cut the fertiliser prices by $36-50 a tonne as the Indian importer is hit by an 18.5% depreciation in rupee since the beginning of this fiscal. If prices are not cut, Iffco may stop future imports as it is not in a position to pass on the higher cost to farmers, Iffco MD US Awasthi told FE.

The falling rupee has adversely affected corporates which borrowed heavily overseas to benefit from lower rates but are now staring at huge mark-to-market losses. Hedging helps minimise currency risk.

There has been an increasing ?dollarisation of Indian companies’ balance sheets? in the past few years, which can be dangerous if the currency risk is not hedged properly, said Axis Bank president, (strategic initiatives, corporate banking) Nilesh Shah. The rupee is falling against the dollar mainly because the world is pumping money into US treasuries, on fears of a severe recession in the euro zone.