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Informist, Friday, Feb. 7, 2025

--RBI Malhotra: To introduce fwd contracts in govt securities 
--RBI Malhotra: Bond fwds to help long-term investors manage interest rate risk 
 

MUMBAI – Reserve Bank of India Governor Sanjay Malhotra said at the outcome of the three-day Monetary Policy Committee meeting Friday that the central bank will include forward contracts in government securities, adding to the suite of interest rate derivatives products available to market participants for managing their interest rate risks. 

As per the Statement of Developmental and Regulatory Policies, in addition to interest rate swaps, products such as interest rate options, interest rate futures, interest rate swaptions, forward rate agreements, amongst others, are available to market participants.

Malhotra said the RBI had received feedback about the need to allow forward contracts in government securities to enable further market development. Such forward contracts would enable long-term investors like insurance funds to manage their interest rate risk across interest rate cycles.

The move will also enable efficient pricing of derivatives that use bonds as underlying instruments, the statement said. Draft directions in this regard were issued in December 2023 and the final directions, taking into account the public feedback, will be issued shortly, it added.  End

Reported by Siddhi Chauhan

Edited by Nishant Maher

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