Hedging hit hard

The Reserve Bank of India issued draft guidelines last November proposing a ban on reduced-cost derivatives structures – the source of much controversy in India’s corporate market during the past three years. But some corporates are not happy with the RBI’s thinking and are lobbying the central bank to change its stance. Sarfraz Thind reports

India’s regulators have tended to err on the side of caution when dealing with the country’s derivatives sector. And many market participants believe this conservative approach resulted in the ­Reserve Bank of India (RBI) drafting stringent new proposals last year that could ban zero- or reduced-cost structures, outlaw the use of complex onshore foreign exchange derivatives and incorporate far