As I have mentioned earlier, this surely raises systemic concerns. 26. The regime for foreign currency borrowing so far has been anchored on three criteria: the use, the cost and the tenor of borrowing. These are sound principles indeed.
There may be a case for doing away with the cost criterion since it is in a way superfluous in view of the other restrictions, including a loosely monitored aggregate cap. One view is that, if it is mandated that all foreign currency borrowing should be necessarily hedged, all restrictions can be dispensed with. But then, is mandatory hedging the most appropriate policy?