Indian firms are opting for cross-currency swaps to convert part of their rupee debt into dollars in an attempt to trim borrowing costs as U.S. interest rates decline, six bankers told Reuters.
The Federal Reserve began easing with a larger-than-expected 50 basis point rate cut on Wednesday and is projected to reduce borrowing costs by a total of 200 bps over the next 15 months, as per the central bank’s forecast.
Two Indian conglomerates, a local unit of a global investment firm, and a renewable energy company recently used cross-currency swaps to convert rupee liabilities into dollars, a banker at a foreign bank said.
The banker did not want to be named because he is not authorized to speak to the media.
Cross-currency swaps are derivative structures that allow companies to convert loan principal, interest repayments, or both, from one currency to another, helping manage interest rates and forex risk. Read more
Source: Economic Times