Another related issue that banks and corporates have discussed with us is the nonavailability of long-term hedging products to the corporates. While OTC forward market is liquid enough up to one year, the exchange traded market, which I would come back to, is liquid only in the near month segment.
If the interest rate parity holds good, forward rate should reflect the interest rate differentials. Otherwise, it becomes more a function of demand and supply. While there has been no regulatory restriction on booking of long-term forwards beyond one year, market participants generally prefer booking short-term contracts (maximum tenor up to one year) and then roll it over till the maturity of the exposure.