Non-Deliverable Forwards (NDF)

On 23rd August, 2023, the Reserve Bank of India (RBI) asked some banks to stop taking fresh arbitrage positions in the non-deliverable forwards (NDF) market.

  • An NDF is a short-term, cash-settled forwards contract that investors use to trade in currencies in an offshore market.
  • The two involved parties create a settlement between the contracted NDF rate and the leading spot price when both parties agree on a notional amount.
  • NDFs in the non-deliverable forward market are always settled in cash and are non-deliverable, meaning the trader cannot take the delivery of the currencies.
  • These contracts are OTC (over-the-counter) and are ....
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