Unhedged exposure via external commercial borrowing new threat to rupee

According to RBI data on external debt released, short-term debt on a residual maturity basis accounted for 44.1% of foreign exchange reserves at the end of March 2022

At a time when higher US interest rates and a global flight to the greenback have exerted pressure on the Indian rupee, currency experts have flagged another potential risk for the exchange rate -- unhedged exposure through external commercial borrowing (ECB).

Accompanying the unhedged exposure that Indian firms have to such overseas borrowings is increased scrutiny on the part of overseas lenders when it comes to Environmental Social and Governance (ESG) norms, analysts told Business Standard.

According to Reserve Bank of India data on external debt released at the end of June, short-term debt on a residual maturity basis accounted for 44.1