Also Read: RBI cracks down on forex speculative trading: Sources
In the wake of increased exchange rate volatility, some Indian companies are likely to incur losses due to their un-hedged foreign currency exposures. These steps are expected to help banks deal with the probability of defaults in an environment of high currency volatility.
However, speaking to CNBC-TV18, Diwakar Gupta, MD & CFO of the country's largest lender State Bank of India says the biggest problem will be calculation of corporates' un-hedged exposure.
He says volatility of the rupee over the last decade on an annual basis will determine the likely losses, after which the likely loss for the corporate on its whole balance sheet has to be compared with the earnings before interest and depreciation (EBID).
"A simpler calculation would have been much more in order. Let us say: Rs 2 per dollar on the dollar un-hedged position rather than going into this grid of the overall balance sheet exposure, comparison to EBID and then a 15-30-50 or 75 percent. We need a much simpler dispensation; otherwise it is really going to be expensive, inaccurate, tedious and time consuming," he says.
Gupta says more capital will be needed to be set aside, if it is 75 percent or more of the likely loss percentage over EBID, which may lead to higher pricing. "In the other event, if the provisioning is not very large, I do not think we need to re-price. We will just factor it into our results and show a slightly lower profit doing this as a one-time," he says.
Below is an edited transcript of Gupta's exclusive interview on CNBC-TV18.
Q: The Reserve Bank of India (RBI) issued draft rules yesterday, that unhedged FX exposures of your clients will mean a punishment for you in terms of higher provisioning. Do you even have a rough idea of how many clients have un-hedged exposure where the loss can be over 75 percent of your EBID? Any idea how much provisioning might go up by at your end?
A: The biggest problem here is going to be: how the calculations will be made. The guidelines came out yesterday night and we have not gone through the fine print. There are two or three things, which stand out. Firstly, the entire un-hedged position of the corporate across banks has to be ascertained.
Secondly, volatility of the rupee over the last 10 years on an annual basis will determine what could be the likely loss and then the likely loss for the corporate on its whole balance sheet has to be compared with the earnings before interest and depreciation (EBID).
It is a very tough calculation to make. In real time, it will be very well near impossible. We do not have any idea today of the amount of additional provisioning that we may need to make. We have totally about USD 10 billion across foreign currency (non resident) bank accounts (FCNB), export bills rediscounting (EBR), preshipment credit in foreign currency (PCFC) and external commercial borrowings (ECB). Some of it is with the natural hedge; some of it is with a formal hedge and some of it is unhedged because it is our large corporates like the Tatas or the Reliance and all.
The other thing is that the additional provision is on the entire banking exposure, not just on the FX exposure. It will take a while to get to know exactly what the quantum is. A simpler calculation would have been much more in order. Let us say: Rs 2/dollar on the dollar unhedged position rather than going into this grid of the overall balance sheet exposure, comparison to EBID and then a 15-30-50 or 75 percent. We need a much simpler dispensation; otherwise it is really going to be expensive, inaccurate, tedious and time consuming.
Q: Do you also expect this to make loans expensive? There are further rules that you have to give your data to the credit rating agencies, as well as, you will have to work it into your internal rating of those companies. And if you find them exposed, your loans to them will also accordingly become expensive. Generally, do you think loans become expensive either across the board or to those guys who have FX loan exposures?
A: To the extent that more capital will need to be set aside, which is the case if it is 75 percent or more of the likely loss percentage over EBID, then to the extent you need to allocate more capital, certainly the pricing itself goes up. In the other event, if the provisioning is not very large, I do not think we need to re-price all loans. We will just factor it into our results and show a slightly lower profit doing this as a one-time.
Anda sedang membaca artikel tentang
Calculating corporates' unhedged exposure a tall task: SBI
Dengan url
https://kesehatanda.blogspot.com/2013/07/calculating-corporates-unhedged.html
Anda boleh menyebar luaskannya atau mengcopy paste-nya
Calculating corporates' unhedged exposure a tall task: SBI
namun jangan lupa untuk meletakkan link
Calculating corporates' unhedged exposure a tall task: SBI
sebagai sumbernya
0 komentar:
Posting Komentar