By NIMesh Vora and Jaspreet Kalra
Mumbai – Indian importers closed last month at a record pace with banks with banks and benefited from a meeting in the rupid.
A few of these banks are now confronted with margin calls because of fictional losses in those positions, four bankers said.
Importers bought dollar/rupid-voice exchange contracts worth $ 66.5 billion in March, which marked an increase of 75% on an annual basis and the highest monthly volume clocks since Clearing House Clearing Corporation of India Ltd (CCIL) started publishing data in July 2016.
Forward contract activity by exporters, on the other hand, fell year-on-year, which underlined the divergence.
Record hedging was powered by a rally of more than 2% in the rupee in March, which marked a rebound of record low levels.
The recovery followed at a period of sharp falls in the rupid, which ran to a low point of 87.95 in mid -February and dropped 3.5% in the three months before March.
In March the currency was helped by a decrease in the US dollar and foreign intake, which led investors to settle Bearish betting. It was last quoted on 86.07 on Tuesday.
With the prospects of the rupid fairly uncertain, importers, wary of a return of a weakening preference, were quick to lock rates through forward contracts, said bankers.
The pace of the decline of the rupid in the direction of the 88 level was “unexpected” and most importers were “not agile enough” to respond, so they hated the pick-up in volatility, an FX seller said anonymity because they were not authorized to speak with media.
“They all jumped in when the chance came in March.”
Banks are confronted with extra margin calls
The dollars that companies buy or sell on the forward market are covered by banks by compensating for positions with other lenders. These interbank transactions are arranged by the local clearing house.
If a bank has a considerably higher share of importer customers compared to exporters, the outstanding FX forward contracts can be confronted with fictional losses.
Although the losses of the Mark-to-Market are among the bank customers, the Clearing House Banks requires extra margin to cover the exposure.
“We had to post an extra margin for CCIL, largely because of the activity of importers,” said a treasury head at a small foreign bank.
“For large banks, placing the extra margins is a matter of routine.”
An FX seller at a large foreign bank said that their bank had received a “small” margin call from CCIL.
CCIL did not immediately respond to an e -mail to ask for comments.
(Reporting by NIMesh Vora and Jaspreet Kalra; Editing by Mrigank Dhaniwala)
