RBI Updates Rules for Rupee Interest Rate Derivatives
New Draft Regulations Released
The Reserve Bank of India (RBI) has shared new draft rules. These rules aim to update the guidelines for Rupee Interest Rate Derivatives (IRD). The goal is to match current market practices and include more non-resident participants.
Why the Update?
The last update to the framework was in June 2019. Since then, the financial world has changed a lot. New products have come up. More non-residents are now part of the market. The RBI wants to keep up with these changes.
What Are Interest Rate Derivatives?
Interest Rate Derivatives are financial contracts. Their value comes from:
- One or more rupee interest rates
- Prices of rupee interest rate instruments
- Rupee interest rate indices
Key Changes in the Draft
The draft includes several important changes:
- Non-Resident Participation: Non-residents can now do IRD transactions through their central treasuries or group entities. Market-makers must ensure these entities are authorized to act for the end user.
- Simplified Reporting: The draft aims to simplify reporting requirements. This will ease the compliance load on market participants.
- Global Reporting Mandate: A new rule requires reporting of Rupee IRD transactions done globally. This will improve market transparency.
Feedback Invited
The RBI has asked for feedback on the draft. Banks, market participants, and other interested parties can share their views by July 7, 2025.
