RBI Issues Rupee Interest Rate Derivatives Directions 2025

PR No. 2025-2026/1661; Dated: 08.12.2025

1. Regulatory Overview

The Reserve Bank of India (RBI) has issued the ‘Rupee Interest Rate Derivatives (IRD) Directions, 2025’, providing a consolidated and updated regulatory framework governing Rupee IRD markets in India. The Master Direction modernises the earlier regime to reflect evolving market structures, product innovation, and wider risk-hedging needs across the financial system.

These Directions reinforce the supervisory architecture for banks, financial institutions, market intermediaries, corporates, and non-resident participants engaged in Rupee IRD transactions.

2. Purpose of the Updated Framework

The revised Directions aim to:

• Strengthen market integrity, transparency, and governance
• Support risk management requirements for financial institutions, corporates, and investors
• Align regulatory norms with global IRD market practices
• Promote orderly, efficient, and well-supervised development of Rupee interest rate derivatives

The Directions are intended to facilitate hedging, improve liquidity, enhance price discovery, and reduce systemic risk through better oversight and market discipline.

3. Scope of Coverage

The Directions govern Rupee IRD transactions undertaken:

• In the Over-the-Counter (OTC) market, and
• On recognised stock exchanges in India

This dual-framework approach provides regulatory uniformity across both bilateral and exchange-traded derivative segments.

4. Key Regulatory Provisions

The Master Direction lays down requirements in the following broad areas:

4.1 Eligible Participants

Rules governing:

• Banks, financial institutions, primary dealers, corporates, NBFCs, and other entities permitted to participate in Rupee IRD markets
• Conditions for participation and product usage

4.2 Transactions with Non-Residents

• Norms for non-resident entities entering Rupee IRD transactions for hedging, investment, or market-making
• Conditions applicable to cross-border counterparties and settlement mechanisms

4.3 OTC Market Guidelines

• Standardised terms, documentation, conduct, and risk-management rules for bilateral trades
• Requirements on valuation, margining, settlement, and product usage

4.4 Reporting Requirements

• Mandatory transaction reporting to trade repositories
• Enhanced visibility and supervisory analytics for RBI to monitor systemic risk
• Timelines and formats for reporting of bilateral and exchange-cleared trades

4.5 Information and Compliance Obligations

• Participants must furnish information sought by RBI for supervisory or market-monitoring purposes
• Maintenance of records, internal controls, and audit readiness

5. Effective Date

The Directions will come into force from March 01, 2026.

From this date onward:

• All new Rupee IRD transactions must comply with the updated Directions
• Market participants must align systems, documentation, reporting pipelines, and compliance frameworks with the revised norms

6. Regulatory Intent and Market Impact

The Directions are expected to:

• Enhance market transparency, supervisory insight, and investor confidence
• Improve risk-hedging access for banks, NBFCs, corporate treasuries, and institutional players
• Deepen liquidity and broaden product usage in interest rate derivatives
• Support the stable development of fixed-income markets and financial stability

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