Mumbai: The Reserve Bank of India (RBI) on Monday issued clarifications on hedging of currency for external commercial borrowings (ECBs) in a notification on its website.

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 notification said.

The hedging period will be for the entire life of the liability with a minimum one-year rollover option, 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.

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