The average daily volume in the inter-bank USD/INR options is currently just about 2.6 per cent of that of inter-bank USD/INR forwards. The decline in the inter-bank option trading volume is attributed to fall in the usage of options by the clients as well as fall in the proprietary trading by banks. 20.
It is a well-recognised fact that the option contracts provide lot of flexibility to the end users for hedging their currency exposures in cost effective ways. The plain vanilla option contracts may be combined in various ways for reducing the cost of hedging. The Indian currency option market needs to be rejuvenated to cater to the needs of various real sector economic agents.