Nod For Forward Contracts In Govt Securities

Mumbai: The Reserve Bank Governor announced on Friday that the RBI will be introducing forward contracts in Government securities, for which the directions will be issued shortly. “We have been receiving feedback about the need to allow forward contracts in Government securities to enable further market development.

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,” the RBI Governor said. Over the past few years, the Reserve Bank 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, etc., are available to market participants.