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These entities can act as market makers for products only if they have the ability to price/value such products and the pricing of such products is demonstrable at all times. Their exposure and mark-to-market on these products are appropriately captured and reported in the returns furnished to the central bank.
They have to provide information about dealing in such financial products in the manner, format, and within the time frame as prescribed by the RBI.
They are barred from dealing in products linked to the rupee unless specifically permitted by the RBI. Also, they are not allowed to accept structured deposits from any Indian residents.