Answer: Permitted purpose depends on the currency pair viz. Foreign Currency - Indian Rupee (FCY-INR) and Foreign Currency - Foreign Currency (FCY-FCY).

• Permitted purpose for undertaking FCY-INR forex derivative transactions (e.g., USD-INR forwards, futures, options, etc.): Hedging exchange rate risk.

• Permitted purpose for undertaking FCY-FCY forex derivative transactions (e.g., EUR-USD forwards, futures, options, etc.): No restrictions in terms of purpose.

• OTC derivatives

• For retail users
  
  • Foreign Exchange Forward
  • Foreign Exchange Swap
  • Currency Swap
  • Purchase of Call and Put Options
  • Purchase of Call and Put Spreads
    
• For non-retail users: Any foreign exchange derivative contract, including covered options, which the Authorised Dealer can price and value independently and is approved by the board of the Authorised Dealer, provided that the potential loss from the derivative transaction to the user, in any scenario, does not exceed the loss that the user would face if he had left the position unhedged.

• Exchange traded derivatives

• Foreign Exchange Future

• Foreign Exchange Option

Answer: Regulated financial entities, other entities with a minimum net worth of Rs.500 crore and non-residents (other than individuals) are classified as non-retail users. All other types of user are classified as retail users.

Answer: Forex derivatives traded on exchanges are referred to as exchange traded forex derivatives. All other forex derivatives, including those traded on ETPs, are called OTC forex derivatives.