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.

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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.