Answer- C
1) As per a Working Paper by the Reserve Bank of India (RBI), firms in India should hedge 63 percent of the External Commercial Borrowings (ECBs) they raise during periods of high volatility in the foreign exchange (forex/FX) market. The optimal hedge ratio, which indicates the proportion of total asset or liability exposure that an entity should hedge against exchange rate fluctuations, has been estimated at this percentage. 2
)The Paper states that two significant factors affecting the issuance of ECBs are domestic economic activity and fluctuations in the exchange rate of the Indian rupee. A decline in the value of the Indian rupee has a negative effect on the issuance of ECBs, both in the short term and the long term.