RBI Allows Standalone Primary Dealers in NDD Contracts

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  • Last Updated on 24 September, 2025

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RBI permits SPDs in rupee derivative contracts

Circular No. RBI/2025-26/78 A. P. (DIR Series) Circular No. 10, Dated 22.09.2025

1. Introduction

The Reserve Bank of India (RBI) has issued a significant directive expanding the scope of entities permitted to engage in non-deliverable derivative (NDD) contracts involving the Indian Rupee. This move reflects RBI’s ongoing efforts to deepen financial markets, enhance risk management avenues, and align India’s regulatory framework with global practices.

2. Inclusion of Standalone Primary Dealers

Under the new guidelines, Standalone Primary Dealers (SPDs) that are authorised as Authorised Dealer (AD) Category-III have now been permitted to transact in NDD contracts. This marks a notable broadening of participation, as previously the facility was restricted to a select group of institutions. The inclusion of SPDs is expected to increase liquidity in the derivatives market and provide them with additional tools to manage currency-related risks.

3. Previous Framework

Before this announcement, the facility to transact in Rupee-denominated NDD contracts was limited to AD Category-I banks operating International Financial Services Centre (IFSC) Banking Units and overseas banks. By extending this permission to SPDs, the RBI is effectively bridging a regulatory gap and placing these entities on a more level playing field with banks and other global participants.

4. Implications for Market Participants

The move is expected to have multiple benefits. SPDs will now be better positioned to hedge exposures and diversify their trading portfolios, thereby enhancing market resilience. Additionally, by expanding the base of participants in the NDD market, the RBI aims to improve price discovery and promote greater stability in Rupee trading. This step also underscores RBI’s commitment to fostering a more inclusive and competitive financial market ecosystem.

5. Conclusion

Effective immediately, the RBI’s directive marks a progressive step toward liberalising India’s derivatives market. By granting SPDs the ability to transact in Rupee-linked NDD contracts, the central bank has widened participation, improved risk management options, and reinforced confidence in the Indian financial system. This reform is expected to pave the way for deeper integration of India’s currency markets with global financial systems.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied