# Non-Deliverable Forwards (NDFs) > Non deliverable forwards are cash settled currency forwards for restricted currencies like the Indian rupee. Learn how NDFs work, fixing rates, uses and risks. Source: https://learn.tradelabsai.com/forex/non-deliverable-forwards/ Track: Forex · Level: Advanced · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Non-Deliverable Forwards (NDFs)", https://learn.tradelabsai.com/forex/non-deliverable-forwards/ A non deliverable forward (NDF) is a currency forward that is settled in cash, usually in US dollars, rather than by exchanging the two currencies. NDFs exist for currencies that cannot be freely traded offshore because of capital controls, such as the Indian rupee, Korean won, Taiwan dollar, Brazilian real and Chinese yuan in its onshore form. They let international investors and companies hedge or speculate on these currencies without moving money in or out of the restricted market. ## How an NDF works 1. **Two parties agree** on a notional amount, a forward rate and a fixing date. 2. **On the fixing date,** the official or benchmark spot rate is observed. 3. **On the settlement date,** usually two business days later, one party pays the other the difference in US dollars. ``` settlement (USD) = notional × (fixing rate - NDF rate) / fixing rate ``` for a contract where the notional is in US dollars and rates are quoted as local currency per dollar. The sign shows which party pays. **Example: A rupee NDF** A fund expects the Indian rupee to weaken. It buys USD/INR through a 3 month NDF with a notional of $10 million at a rate of 84.00 rupees per dollar. At the fixing date, the official reference rate is 85.20. Settlement = 10,000,000 × (85.20 minus 84.00) / 85.20 ≈ $140,845, paid to the fund. If the fixing were 83.00, the fund would pay about 10,000,000 × (84.00 minus 83.00) / 83.00 ≈ $120,482. No rupees change hands either way. ## Main NDF currencies | Currency | Code | Reason for NDF market | |---|---|---| | Indian rupee | INR | Restrictions on offshore rupee trading | | Korean won | KRW | Onshore market restrictions | | Taiwan dollar | TWD | Capital controls | | Brazilian real | BRL | Onshore convertibility limits | | Chinese yuan (onshore) | CNY | Capital controls; offshore CNH also trades deliverably | | Philippine peso, Indonesian rupiah, Colombian peso, Chilean peso and others | Various | Restrictions or limited offshore access | BIS data show NDFs are a significant share of trading in several emerging market currencies, with large volumes booked in financial centres such as London, Singapore and New York. ## Fixing rates Each NDF currency has an agreed fixing source, often a central bank published rate or a benchmark from an industry body. Fixing disputes are rare but possible during market disruptions, and documentation specifies fallbacks. See [FX Fixings: London and Tokyo](https://learn.tradelabsai.com/forex/fx-fixings-london-and-tokyo/). ## Who uses NDFs - **Foreign investors** hedging stocks and bonds in restricted markets. - **Multinational companies** hedging earnings from subsidiaries. - **Hedge funds** speculating on emerging market currencies. - **Banks** managing their exposures. ## Onshore vs offshore NDF prices can differ from onshore forward prices because of capital controls. When offshore investors are pessimistic, the NDF can imply a weaker currency than the onshore market. Central banks sometimes intervene in NDF markets to influence sentiment, as the Reserve Bank of India has done. See [Central Bank Intervention](https://learn.tradelabsai.com/forex/central-bank-intervention/). ## Risks - **Market risk:** emerging market currencies can move sharply in crises. - **Convertibility and policy risk:** governments may change rules or fixing methods. - **Counterparty risk:** NDFs are over the counter, though many are now centrally cleared after post 2008 reforms. See [Market, Credit and Counterparty Risk](https://learn.tradelabsai.com/portfolio/counterparty-risk/). - **Basis between onshore and offshore markets.** - **Liquidity** in longer tenors. ## NDFs vs deliverable forwards | | Deliverable forward | NDF | |---|---|---| | Settlement | Full exchange of currencies | Net cash in USD | | Currency access needed | Yes | No | | Typical currencies | Freely convertible | Restricted | | Credit exposure | Full notional at settlement | Only the net difference | See [FX Forwards and Forward Points](https://learn.tradelabsai.com/forex/fx-forwards-and-forward-points/). ## Frequently asked questions ### What is a non deliverable forward? A cash settled currency forward in which only the difference between the agreed rate and a fixing rate is paid, usually in US dollars, with no exchange of the restricted currency. ### Why do NDFs exist? Because some currencies have capital controls that prevent offshore investors from trading or delivering them directly. ### Which currencies trade as NDFs? Common NDF currencies include the Indian rupee, Korean won, Taiwan dollar, Brazilian real and several other emerging market currencies. Next, learn about currency swaps in [FX Swaps and Currency Swaps](https://learn.tradelabsai.com/forex/fx-swaps-and-currency-swaps/). ## Continue learning - Next lesson: [FX Swaps and Currency Swaps](https://learn.tradelabsai.com/forex/fx-swaps-and-currency-swaps/) - Previous lesson: [FX Forwards and Forward Points](https://learn.tradelabsai.com/forex/fx-forwards-and-forward-points/) - Related: [FX Forwards and Forward Points](https://learn.tradelabsai.com/forex/fx-forwards-and-forward-points/): An FX forward fixes an exchange rate for a future date. Learn how forward rates and forward points are calculated from interest rates, with examples and uses. - Related: [Forwards vs Futures](https://learn.tradelabsai.com/futures/forwards-vs-futures/): Forwards are private, customised contracts; futures are standardised and exchange traded. Compare their structure, settlement, counterparty risk and uses. - Related: [FX Fixings: London and Tokyo](https://learn.tradelabsai.com/forex/fx-fixings-london-and-tokyo/): FX fixings are daily benchmark exchange rates used by funds and companies. Learn how the London 4pm and Tokyo fixes work, the flows around them and the 2013 scandal. - Related: [Market, Credit and Counterparty Risk](https://learn.tradelabsai.com/portfolio/counterparty-risk/): Learn the difference between market risk, credit risk and counterparty risk, how each is measured and managed, and real cases from Lehman Brothers to FTX. - Related: [Currency Pairs: Majors, Minors and Exotics](https://learn.tradelabsai.com/forex/currency-pairs/): Forex trades currencies in pairs, like EUR/USD. Learn base and quote currencies, how to read a quote, majors, crosses and exotics, and what moves each pair.