{"id":96302,"date":"2026-04-03T12:05:41","date_gmt":"2026-04-03T06:35:41","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=96302"},"modified":"2026-04-03T12:05:41","modified_gmt":"2026-04-03T06:35:41","slug":"non-deliverable-derivative","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/non-deliverable-derivative\/","title":{"rendered":"Non-Deliverable Derivative"},"content":{"rendered":"<h2><b>Non-Deliverable Derivative Latest News<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Recently, the Reserve Bank of India\u2019s (RBI) gave a directive to bar banks from non-deliverable derivative (NDD) contracts in the rupee.<\/span><\/p>\n<h2><b>About Non-Deliverable Derivative<\/b><\/h2>\n<ul>\n<li><span style=\"font-weight: 400;\">An NDD is a <\/span><b>derivative contract<\/b><span style=\"font-weight: 400;\"> where two parties agree on a <\/span><b>future exchange rate for the rupee, but settle the difference in cash<\/b><span style=\"font-weight: 400;\">, usually in US dollars.<\/span><\/li>\n<li><b>Reason for formation:<\/b><span style=\"font-weight: 400;\"> As India has capital controls, offshore investors <\/span><b>can\u2019t freely trade<\/b><span style=\"font-weight: 400;\"> in the <\/span><b>rupee in physical form<\/b><span style=\"font-weight: 400;\">. This led to the creation of the NDD markets in the rupee.<\/span><\/li>\n<li><b>Participating Parities:<\/b><span style=\"font-weight: 400;\"> The NDD market is widely <\/span><b>used by foreign investors, hedge funds and global banks<\/b><span style=\"font-weight: 400;\"> who cannot freely access and play in the Indian rupee market.<\/span><\/li>\n<li><span style=\"font-weight: 400;\">These trades take place offshore, <\/span><b>outside the control of the RBI.<\/b><\/li>\n<li><span style=\"font-weight: 400;\">This often acts as a <\/span><b>price discovery mechanism for the rupee<\/b><span style=\"font-weight: 400;\">, even influencing expectations before Indian markets open.<\/span><\/li>\n<li aria-level=\"1\"><b>Issues with NDD<\/b><\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Distort Price Discovery:<\/b><span style=\"font-weight: 400;\"> These instruments have long been criticised for <\/span><b>distorting price discovery<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Used For Speculation:<\/b><span style=\"font-weight: 400;\"> Some participants would <\/span><b>cancel and re-enter contracts<\/b><span style=\"font-weight: 400;\"> to take advantage of favourable movements, effectively turning hedging tools into speculative instruments.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/ndd-ban-is-it-the-end-of-speculative-games-in-rupee-10616229\/#:~:text\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Non-Deliverable Derivative is a derivative contract where two parties agree on a future exchange rate for the rupee, but settle the difference in cash, usually in US dollars. Read more about Non-Deliverable Derivative, Meaning, Issues, Latest News.<\/p>\n","protected":false},"author":24,"featured_media":96319,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[6567],"class_list":{"0":"post-96302","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"tag-non-deliverable-derivative","9":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/96302","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/24"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=96302"}],"version-history":[{"count":4,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/96302\/revisions"}],"predecessor-version":[{"id":96327,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/96302\/revisions\/96327"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/96319"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=96302"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=96302"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=96302"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}