The products inherently involve a trade-off between reduction in the cost of hedging and a corresponding increase in risk. The concerns relating to proper valuation, mis-selling of such products and other irregularities that emerged in the recent past, have forced the Reserve Bank to re-evaluate the propriety of allowing such products in India. 50.
In response to the draft Guidelines, many corporates and industry associations FEDAI and FIMMDA have represented that prohibiting cost reduction structures will seriously impede the dynamic forex risk management operation of corporates and that their competitiveness in the global markets, as their counterparts have flexibility in using such products internationally.