RISING RUPEE

Rupee has been touching its peak against dollar since the last few months. Boosted by high interest rate and caused by the tightening of the money market, its posing a threat to the very existence of small exporters. Some of the exporters have started postponing their receivables and are choosing to park funds in the Exchange Earners Foreign Currency(EEFC) accounts. They will convert those funds into rupee once the rupee will stabilise.

Banks too have become cautious while lending to small and mid sized enterprises (SMEs) in export oriented sectors because the result could be an accumulation of non performing assets as they don't use much of hedging instruments.

Exporters on the other hand are seeking concessions in the form of subsidies from the central govt. Few SMEs are trying to renegotiate contracts with buyers in the overseas market.Some large corporates have cut down their export operations and instead are diverting their focus on the domestic market or cutting the production itself.

Stronger rupee has only benefitted the foreign institutional investor.