PIL seeks probe into cos' forex derivatives losses

MUMBAI: A public interest litigation (PIL) has been filed in the Bombay High Court relating to losses from forex derivatives contracts that thousands of big and small corporates had entered into with some Indian banks, mainly large private ones. The PIL, filed by a city-based social activist and businessman Rajendra Thacker, has requested the court to set up a high power committee to investigate the failure of the central government, RBI and the Enforcement Directorate to control and supervise such derivatives contracts. As per a statement made by the finance minister in the parliament, total exposure by Indian corporates to forex derivatives was a whopping Rs 127 lakh crore. Since these derivatives contracts are off balance sheet entries, they are not reported by the banks in their accounts. The PIL has also requested the court to direct RBI and the government to discloses how much the banks and the corporates have lost from such transactions. The PIL is expected to come up for hearing soon. The PIL has also pleaded for a look into the justifications on the part of the banks and other related entities to be party to such deals when they themselves had no underlying exposure, a violation of Foreign Exchange Management Act (FEMA) and RBI Act. Thacker, in his petition, has also requested to make all such contracts illegal and void, and direct the authorities to ban such contracts. Interestingly, as Thacker pointed out, most of the forex derivatives contracts were benchmarked to Swiss Franc and Japanese Yen and were for a fixed period of the year.
16 Jun 2008, 0244 hrs IST, Partha Sinha,TNN
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