Foreign exchange risk hedging rules permit forwards, OTC derivatives and commodity/freight hedges under specified conditions and reporting. Residents and AD Category I banks may enter into forward contracts and OTC derivatives to hedge bona fide foreign exchange exposures subject to documentary verification or approved past performance/self declaration routes, limits tying notional and tenor to underlying exposures, special provisions for SMEs, individuals and FIIs, prohibitions on leveraged swap structures and net premium receipts, and extensive reporting and risk management, capital and approval conditions for options, currency futures and commodity/freight hedging.