RBI's 20% FX Reserve Requirement Raises Hedging Costs Up To 150 Basis Points

The RBI's new Foreign Exchange Risk Reserve (FERR) requires banks to maintain reserves equivalent to 20% of the rupee value of eligible foreign exchange derivative contracts exceeding $2 million. Builders in cross-border payments and forex platforms need to account for this funding cost pass-through—genuine hedges now carry artificial expense that will reshape pricing models for importers.

Source: ET BFSI ↗