“It’s a concern for everybody if there’s a lot of foreign loans outstanding and premiums are rising due to that,” said Prabal Banerjee, group finance director at conglomerate Bajaj Group. “Many good companies
have borrowed funds via offshore bond issuance. This has led forward premia to go through the roof.”
The Reserve Bank of India swapped a total of $10 billion in March and April, with demand topping targets at both months’ currency swap auctions.
“RBI has taken steps in the past to absorb dollar inflows through currency swaps, which had the effect of bringing down the forward premiums,” said Bajaj’s Banerjee. “RBI may need to take more steps if premium levels stay elevated.”