India importers press on with rupee hedges despite RBI's higher — cost deterrent

By Nimesh Vora MUMBAI, Oct 14 (Reuters) — Indian importers continue to lock in future dollar purchase rates to protect against the rupee weakening, despite the banks charging more per month for such trades following the central bank's step to make them more expensive. The Reserve Bank of India now requires banks to set aside cash equivalent to 20% of the notional value of the forward dollar contracts they sell. With banks passing the cost of complying on to clients, importers have to pay 11 to 14 paisa per month more to lock in future dollar purchases. However, forward dollar contracts remained attractive for importers. The rupee's recovery, after the Reserve Bank of India set out a series of measures to support the currency, helped offset these charges, bankers told Reuters. They requested anonymity since they were not authorised to speak to the media. The currency has strengthened to a high of 94.72 rupees per dollar on Wednesday from levels near 96.70 last week. Shorter Tenor Hedges The charges vary, depending on the cost of funds, a treasury official at a private-sector lender said, with the cost rising with the length of the contract — meaning, additional costs for near-term c