Banks pitching risky forex hedges to cos

Banks are increasingly pitching hedging strategies to Indian companies that look appealing in the rupee's current low-turbulence spell but could leave them unprotected when they need it the most and lead to sizeable losses.

Target redemption forward (Tarf) is one such product that banks, mostly foreign ones, say can help exporters get a better rate on their future dollar receivables even more alluring since the rupee has been in a mere 2% range since last June, with implied volatility at a one-and-a-half-decade low. "Intuitively, Tarf is highly appealing. All the more right now when you have a growing sense that the rupee is going nowhere," a senior treasury official at a large private sector bank said.