The Reserve Bank of India’s commitment to a stable rupee is having an unintended consequence: local companies are getting complacent about hedging their overseas borrowings. A gauge of expected rupee swings fell the most after Russia among 23 emerging markets over the last two years, thanks to the RBI’s regular interventions in currency markets and its success in boosting India’s reserves.The unhedged foreign-exchange exposure of local corporates and investors combined rose $78 billion between April 2014 and September 2016, Standard Chartered Plc’s calculations show. With global risks such as the uncertainty surrounding US President Donald Trump’s policies, elections in Europe and monetary tightening by the Federal Reserve pointing to a tumultuous 2017, companies and investors could be in for a rude shock should the central bank let go of its rupee grip.

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