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Exotic currency derivatives turn into losses for MSMEs
11 Oct '08
4 min read
The banks had thus positioned themselves in a fiduciary capacity with their advice on cost reduction and risk management. Initially these banks structured a few deals to provide gains for exporters so as to buy their confidence.
It would be pertinent to note that after gaining the confidence of the exporters these banks pushed through products which were grossly in appropriate and unsuitable. The exporters were told that in any un-favourable situation, the banks would forthwith intervene and address the situation so that exporters would not be exposed to any significant risk or loss.
Banks concealed from the exporters the risk inherent in these contracts. The exporters were thrust unlimited risk of currency fluctuation in return for limited gains.
SMEs exporters are on the verge of closure in Ludhiana, Tirupur, Karur, Kanpur, Mumbai, Delhi, Chennai, Panipat, Sholapur etc for no fault of their own except for their unflinching trust in banks. The losses from them cannot be recovered even if the firm the liquidated and all its assets are sold. The closure of these units will have serious social implications besides aggravating unemployment.
It would be pertinent to note that after gaining the confidence of the exporters these banks pushed through products which were grossly in appropriate and unsuitable. The exporters were told that in any un-favourable situation, the banks would forthwith intervene and address the situation so that exporters would not be exposed to any significant risk or loss.
Banks concealed from the exporters the risk inherent in these contracts. The exporters were thrust unlimited risk of currency fluctuation in return for limited gains.
SMEs exporters are on the verge of closure in Ludhiana, Tirupur, Karur, Kanpur, Mumbai, Delhi, Chennai, Panipat, Sholapur etc for no fault of their own except for their unflinching trust in banks. The losses from them cannot be recovered even if the firm the liquidated and all its assets are sold. The closure of these units will have serious social implications besides aggravating unemployment.
Federation of Indian Export Organisations (FIEO)
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