A parallel loan is a financial arrangement between two parties in different countries who agree to lend each other an equivalent amount in their respective currencies. It’s often used by multinational businesses to avoid currency exchange risks and high transaction costs.

For example, an Indian company needing US dollars partners with a US company needing Indian rupees. Both lend each other the required amounts in their local currencies, and at the end of the agreed term, they repay the parallel loans in the original currencies.

This method benefits companies by reducing foreign exchange exposure, avoiding heavy forex fees, and providing quicker access to local currency financing without relying on volatile exchange rates.

Benefits:

• Reduces foreign exchange risk

• Avoids high currency conversion charges

• Provides quick local currency funding

Features:

• Agreement between two companies in different countries

• Repayment in original currency at term end

• Useful for multinational businesses with cross-border needs