The Hindu Business Line : SBT launches derivatives for risk hedging

STATE Bank of Travancore (SBT) has launched derivative products to help exporters and importers hedge their risks resulting from uncertainties in the future movement of interest and exchange rates.

The customers of the bank have been using "forward exchange contracts" to lock in the exchange rate of a currency for a future date. Now, to lock in the interest rates for a future period, the customers can use "forward rate agreements (FRAs)", according to a statement from SBT.

In view of the rising interest rate scenario in the US markets, FRAs will be an effective risk management tool, it says.

SBT had already started offering FRAs to the customers in Kerala enabling them to lock in interest rates on their future borrowings. Now, the exporter-customers, too, will be able to lock in their re-pricing risk on future rollovers of their bank borrowings.

SBT is also geared to offer "option" contracts to the customers to help them cap their downside risk on currency movements.

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