Question

Why did the Reserve Bank of India (RBI) ask banks to set aside incremental provisioning and capital requirements for exposures to entities with unhedged foreign currency exposures?

a.

To encourage banks to take more risks

b.

To discourage banks from lending to entities with unhedged exposures

c.

To ensure that banks are prepared for potential losses due to exchange rate movements

d.

To increase the profitability of banks

Posted under IC 89 Management Accounting

Answer: (c).To ensure that banks are prepared for potential losses due to exchange rate movements Explanation:The RBI asked banks to set aside incremental provisioning and capital requirements to ensure that banks are prepared for potential losses due to exchange rate movements.

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Q. Why did the Reserve Bank of India (RBI) ask banks to set aside incremental provisioning and capital requirements for exposures to entities with unhedged foreign currency exposures?
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