The Reserve Bank of India (RBI) will soon launch final directions for allowing forward contracts in Government securities (G-sec) to enable further market development, Governor Sanjay Malhotra said today.
“Such forward contracts will enable long-term investors such as insurance funds to manage their interest rate risk across interest rate cycles. They will also enable efficient pricing of derivatives that use bonds as underlying instruments,” he said.
Over the past few years, the RBI has been expanding the suite of interest rate derivative products available to market participants to manage their interest rate risks. In addition to interest rate swaps, products such as interest rate options, interest rate futures, interest rate swaptions, forward rate agreements are available to market participants.
The central bank had first issued draft directions in this regard in December 2023 and the final directions, taking into account the public feedback, will be issued shortly, the governor said.