Treasury & Forex Advisory · Question

What does a treasury policy for an MSME usually cover?

Short answer

A treasury policy for an MSME is a short written document that says who may take currency and cash decisions, which exposures must be measured and covered, which instruments are permitted, who the counterparties are, and how results are reported and reviewed. It exists to replace ad hoc decisions with agreed rules.

In more detail

A policy for a small business does not need to be long. A few pages that everyone involved can follow are better than a detailed manual no one reads. Typical sections include the following.

Purpose and scope: which risks it addresses, such as currency, interest and liquidity.
Roles: who proposes cover, who approves it, and who confirms the bank's trade against the instruction.
Measurement: how and how often the net foreign currency position is listed.
Hedge rules: how much of firm and anticipated flows may be covered, and over what horizon.
Permitted instruments: for example forwards, and whether options are allowed at all.
Counterparties: which banks may be used and for what purpose.
Prohibited actions: speculation, covering without an underlying exposure, or one person both deciding and executing.
Reporting and review: how often the position and any gains or losses are shown to the owners or the board.

Most currency regrets come from improvised decisions made under pressure: covering too much after a bad month, or not covering at all after a good one. A rule written in calm conditions reduces both.

It also helps in conversations with lenders, who often ask how foreign currency exposure is managed before sanctioning limits that depend on export cash flows.

Keep it living

Review the policy at least once a year and after any major change such as a new market, a foreign loan or a large order.

Key points

A policy is a short written set of rules for currency and cash decisions.
It names roles, so approval and execution are separated.
It sets hedge ratios, permitted instruments and approved bank counterparties.
It forbids covering without a real underlying exposure and bans speculation.
Regular review keeps it aligned with the business as it changes.

Who this applies to

Owners of growing exporting or importing businesses without any formal rules.
Finance heads asked by lenders how currency risk is controlled.
Partners or directors who want decisions made by agreed process.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority. Lalsar Holdings' financial advisory and financing work is advisory and facilitation only. Lalsar Holdings is not a lender. Sanction and disbursement of any credit facility is at the sole discretion of the partner bank, NBFC, or financial institution involved, subject to their own eligibility criteria and credit policy.