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Informist, Friday, Feb. 6, 2026

--RBI Malhotra: To issue norms on corporate bond indices derivatives 

--RBI Malhotra:To remove limit of INR 2.5 tln invest through voluntary route 
 

NEW DELHI – In a move to deepen the corporate bond market, the Reserve Bank of India proposed to introduce a regulatory framework for derivatives on corporate bond indices and total return swaps on corporate bonds, RBI Governor Sanjay Malhotra said after the sixth bi-monthly meeting of the Monetary Policy Commitee for 2025-26 (Apr-Mar). 

 

"Furthermore, in pursuance of the announcement made in the Union Budget 2026-27 (Apr-Mar), we propose to issue the regulatory framework for derivatives on corporate bond indices and total return swaps on corporate bonds," Malhotra said.

 

The government plans to introduce a market-making framework to develop the corporate bond market, Finance Minister Nirmala Sitharaman had announced in the Union Budget for FY27 Sunday. This framework will provide suitable access to funds and derivatives on corporate bond indices, as well as total return swaps on corporate bonds, aiming to deepen market participation and improve liquidity, Sitharaman had said.

 

"An active derivatives market can facilitate efficient management of credit risks, improve liquidity and efficiency in the corporate bond market and facilitate issuance of corporate bonds across the rating spectrum," the RBI said. Necessary directions for the same will be issued shortly for public feedback, the central bank added..

 

In another announcement, the RBI also proposed removing the limit of INR 2.5 trillion for investments under the Voluntary Retention Route. Investment through the Voluntary Retention Route in each category of securities will be subject to the investment ceiling for the respective category under the general route. The RBI has also decided to provide additional operational flexibilities for foreign portfolio investors investing through the Voluntary Retention Route. The RBI will issue separate necessary directions on it.

 

The Voluntary Retention Route was introduced by the RBI in March 2019 to provide an additional channel for investments by FPIs with long-term investment interest in the Indian debt markets. "Over the years, the Bank has been recalibrating the route to improve operational flexibilities and ease of doing business. The VRR has been witnessing active investment by FPIs, and over 80% of the current investment limit of Rs. 2.5 lakh crore (INR 2.5 trillion) has been utilised," the RBI said. "With a view to ensuring predictability about the availability of investment limits under the Voluntary Retention Route and to further increase ease of doing business."  End

 

Reported by Vaishali Tyagi

Edited by Tanima Banerjee

 

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