The Hindu Business Line : Crisil to weigh banks' exposure to commodities

RATING agency Crisil would ascertain if banks have taken cover (hedge) for risks from exposure to commodities through lending to corporates, as part of their rating process, said Mr P. Ravimohan, Managing Director and CEO, Crisil Ltd.

Banks should be allowed to insist that their borrowers, who deal in commodities or agri products, should enter into forward contracts, in order to hedge against losses due to spot price fluctuation. This will, in turn protect banks from losses arising out of exposure to commodities, he said, on the sidelines of a seminar organised by the Confederation of Indian Industry.

At present, banks are not allowed to hedge exposures, but the development of the commodities market and introduction of products like options may permit it.

"Banks can lessen their risk by buying options. By preventing banks from taking hedges we are preventing them from taking precaution against price fluctuation," Mr Ravimohan said.

Mutual funds, too, should be allowed to enter in the forward market to hedge against the drop in share prices of corporates that deal in commodities, he said. Banks' role was limited due to the regulatory restrictions, he added.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
NSDL eyes record-keeping agency role for pensions

Economy can absorb petro-price shock

Rupee declines; securities flat

PNB opens ATM at Edappal

Karnataka Bank's 46th ATM at Udupi

HDFC plans listing of BPO venture

Exim Bank gets BBB from Japan agency

Crisil to weigh banks' exposure to commodities

IOB sees Rs 70-cr fee-based income — Ties up with Chola MF

Chidambaram sees no change in interest rates

Nabard hikes rates on capital gains bonds

RBI to raise Rs 2,500 cr under MSS