RBI's new step on Rupee Interest Rate Derivatives; issues draft norms

The
Reserve Bank of India
(RBI) on Monday released a fresh set of draft regulations aimed at updating the rules for Rupee Interest Rate Derivatives (IRD), in a move designed to bring the regulatory framework in line with evolving market practices and increased participation from non-resident entities.
The current framework, last revised in June 2019, is being overhauled to reflect the changes in the financial landscape, including the introduction of new products and a rise in the non-residents involvement in the market.
'Accordingly, a comprehensive review of the IRD Directions was undertaken, and the draft directions have been prepared to align it with the market and other related developments,' the RBI said while releasing the Draft Master Direction, Reserve Bank of India (Rupee Interest Rate Derivatives) Directions, 2025.
Interest Rate Derivatives refer to financial contracts whose value is based on one or more rupee interest rate, prices of rupee interest rate instruments, or rupee interest rate indices.
Among the proposed changes, the draft allows non-residents to undertake IRD transactions through their central treasuries or group entities, where applicable. However, market-makers must ensure such entities are properly authorised to act on behalf of the end user.
The draft also proposes to simplify existing reporting requirements, aiming to ease the compliance load on market participants. In addition, the apex bank plans to introduce a new mandate requiring the reporting of Rupee IRD transactions carried out globally, in an effort to improve transparency across the market.
The RBI has invited feedback from banks, market participants, and other interested parties on the draft by 7 July 2025.
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