Current Affairs – November 2016

RBI issues clarifications on Hedging for External Commercial Borrowings

The Reserve Bank of India (RBI) has issued the Clarifications on hedging for External Commercial Borrowings (ECB) in a bid to effectively address currency risk at the systemic level.

The Clarifications were issued by RBI under section 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999.

What are External Commercial Borrowings (ECBs)?

  • ECBs are commercial loans borrowed from foreign sources for financing the commercial activities in India.
  • It may be bank loans, securitised instruments, buyers’ credit, suppliers’ credit, foreign currency convertible bonds, etc.
  • It should be noted that ECBs are not FDI. In case of FDI, foreign money is used only to finance the equity Capital. But in case ECBs, foreign money is used to finance any kind of funding other than equity.

What hedging means?

  • Hedging is an investment mechanism to cut the risk of adverse price movements in an asset. Usually, a hedge involves taking an offsetting position in a related security.

Highlights of the Clarifications

  • The ECB borrower will be required to cover both principal as well as coupon payments through the hedges done, starting from the day of borrowing.
  • The hedging period will be for the entire life of the liability with a minimum 1 year rollover option. It will be ensuring that the total exposure is not unhedged at any point of time.
  • The borrower has to hedge in such a manner that the projected cash flows match the expectation of the borrowers irrespective of the fluctuations in the foreign currency.
  • The designated banks will have the responsibility of verifying that 100% hedging requirement is complied with.


Kamala Harris becomes first Indian-American to win US Senator seat

California’s Attorney General Kamala Harris (51) created history by becoming the first India-American to win the US Senate (upper chamber) seat from the state.

She defeated fellow Democrat Loretta Sanchez from her own party. She will replace Barbara Boxer who had announced her retirement in 2014 after serving more than two decades in the Senate.

She is the sixth black individual to be elected to the US Senate. US President Barack Obama was the fifth black elected Senator. She is also the first black woman elected to the upper chamber in more than two decades.

About Kamala Harris

  • Kamala Harris is an American politician, lawyer and member of the Democratic Party.
  • She is the daughter of an Indian-American mother Dr. Shyamala Gopalan Harris and a Jamaican-American father Donald Harris.
  • Since 2011, she has been serving as the Attorney General of California. She was elected California’s Attorney General for first time in 2010 and was re-elected in 2014.
  • She had served as Managing Attorney of the Career Criminal Unit in the San Francisco District Attorney’s Office from 1998 to 2000.
  • From 1990 to 1998, she had worked as a Deputy District Attorney in Alameda County, California.
  • She had served as the Chief of the Community and Neighborhood Division in the office of San Francisco City Attorney from 2000 to 2003.