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CS Professional · IFSCA - Regulations, Listing and Compliances · International Financial Services Centres: An Introduction

A GIFT IFSC unit offers the following: (A) an immediate spot exchange of rupees for dollars settled on the same transaction, and (B) a forward contract on dollars settled after three months. Under the Act's definition of 'financial product', which is correct?

Only the three-month forward contract is a financial product. The Act covers foreign currency contracts but excludes contracts to exchange one currency for another that are settled immediately, so the spot exchange falls outside, while the deferred forward contract falls within the definition.

  1. ABoth A and B are financial products
  2. BOnly B is a financial product, as a foreign currency contractCorrect
  3. COnly A is a financial product
  4. DNeither is a financial product unless notified by the Central Government

Explanation

Financial product includes foreign currency contracts other than contracts to exchange one currency for another that are to be settled immediately. A is an immediate exchange and so excluded; B is a deferred foreign currency contract and is included. No notification is needed since it is listed in the definition.

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