M'rashtra wants forex risk hedged cheaper

The state government, which is looking forward for a loan of more than Rs 10,000 crore from the Japan Bank of International Cooperation (JBIC) for Mumbai's infrastructure projects, is scouting for a financial institute, which will hedge its foreign currency fluctuation risk at much lower rates, compared with the six per cent rate charged by the Centre.

Talking to Business Standard, a senior official from the Mantralaya, who is in charge of Mumbai's infrastructure projects, said, "There are many international financial institutes like JBIC who are willing to give the state government loans at a nominal interest rate of 1.5 to 2 per cent per year, but the advantage of getting cheaper finances is neutralised when we have to pay six per cent to the central government for hedging our risk against fluctuations in forex market. That's why we have asked JBIC to find a suitable financial institute that will hedge our risks only at three to four per cent."

The central government charges an exorbitant rate of six per cent on the presumption that rupee would slide against dollar or other influential currencies like pound, euro or yen, but there were a number of instances in the last two year when the Reserve Bank of India (RBI) intervened to prevent the rupee from getting strengthened, he pointed out.