Derivatives are complex financial tools that Indian banks are using more often. They can help banks manage risks, but also come with potential dangers. Larger banks are more likely to use derivatives to hedge against interest rate risks. By analyzing data from 46 Indian banks in 2013, researchers found that banks using derivatives have higher liquidity, lower interest margins, and are larger in size. Using derivatives can decrease exchange rate and long-term interest rate risks for banks without increasing overall systemic risk. This suggests that using derivatives can be beneficial for banks in managing risks.