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According to RBI Working Paper, the optimal hedge ratio for the External Commercial Borrowings raised by firms in India is estimated at how much percent for the periods of high volatility in the foreign exchange (forex/FX) market?

According to RBI Working Paper, the optimal hedge ratio for the External Commercial Borrowings raised by firms in India is estimated at how much percent for the periods of high volatility in the foreign exchange (forex/FX) market? Correct Answer 63

The correct answer is 63%.

Key Points

  • The optimal hedge ratio for the External Commercial Borrowings (ECBs) raised by firms in India is estimated at 63 percent for the periods of high volatility in the foreign exchange (forex/FX) market, according to RBI Working Paper.
  • Optimal hedge ratio is a ratio that implies the percentage of total asset or liability exposure that an entity ought to hedge against exchange rate fluctuations.

  • The optimal hedge ratio for the External Commercial Borrowings (ECBs) raised by firms in India is estimated at 63 per cent for the periods of high volatility in the foreign exchange (forex/FX) market, according to a Reserve Bank of India (RBI) Working Paper.

Additional Information

  • ECBs are in the form of cash bonds, securitised instruments, preference shares (non-convertible/optionally or partially convertible) and some hybrid instruments such as Foreign Currency Convertible Bonds (FCCBs) and Foreign Currency Exchangeable Bonds (FCEBs) raised by eligible resident entities from recognised non-resident entities.
  • RBI:
    • Governor - Shaktikanta Das.
    • Headquarters - Mumbai.
    • Founded: 1 April 1935, Kolkata.
    • The Bank publishes two statutory reports, the Annual Report of the Bank and the Report on Trend and Progress of Banking in India.
    • It also publishes Financial Stability Report.

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