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Eligible market participants execute non-centrally cleared over-the-counter derivatives under updated margin rules. These Directions apply to non-centrally cleared foreign exchange, interest rate, credit, and other derivative contracts entered into on or after the commencement date. Covered entities calculate and exchange variation margin and initial margin based on consolidated group average aggregate notional amounts of outstanding contracts. Entities apply risk-sensitive haircuts to eligible collateral types, use standardised or model approaches for initial margin calculations, and ensure proper segregation and dispute resolution mechanisms. The Reserve Bank of India supersedes the previous variation margin directions.
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RBI/FMRD/2024-25/117 FMRD.DIRD.01/14.01.023/2024-25 May 08, 2024 ( Updated as on February 21, 2025 ) To All eligible market participants Madam/Sir Master Direction – Reserve Bank of India (Margining for Non-Centrally Cleared OTC Derivatives) Directions, 2024
Please refer to Paragraph 10 of the Statement on Developmental and Regulatory Policies announced as a part of the Bi-monthly Monetary Policy Statement for 2019-20 dated February 06, 2020 , on issuance of the Directions regarding exchange of variation margin (VM) and initial margin (IM) for non-centrally cleared derivatives (NCCDs).
The Master Direction – Reserve Bank of India (Variation Margin) Directions, 2022 was issued on June 01, 2022 and the draft Directions prescribing guidelines for exchange of initial margin for NCCDs were issued on June 16, 2022 . Based on the feedback received from the market participants, the draft Directions have since been finalised. The Master Direction – Reserve Bank of India (Margining for Non-Centrally Cleared OTC Derivatives) Directions, 2024 is enclosed herewith.
These Directions have been issued in exercise of the powers conferred under Section 45W of the Reserve Bank of India Act, 1934 and Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and of all the powers enabling it in this behalf.
Yours faithfully, (Dimple Bhandia) Chief General Manager FINANCIAL MARKETS REGULATION DEPARTMENT
Notification No. FMRD.DIRD.02/14.01.023/2024-25 dated May 08, 2024
Master Direction – Reserve Bank of India (Margining for Non-Centrally Cleared OTC Derivatives) Directions, 2024 ( Updated as on February 21, 2025 )
The Reserve Bank of India (hereinafter called the Reserve Bank) hereby issues the following Directions, in exercise of the powers conferred under section 45W of the Reserve Bank of India Act, 1934 (02 of 1934) read with section 45U of the Reserve Bank of India Act, 1934 (02 of 1934) and the Foreign Exchange Management Act, 1999 (42 of 1999) and in supersession of Master Direction – Reserve Bank of India (Variation Margin) Directions, 2022 dated June 01, 2022 .
A reference is also invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 ( Notification no. FEMA.25/RB-2000 dated May 3, 2000 ), Foreign Exchange Management (Debt Instruments) Regulations, 2019 ( Notification no. FEMA 396/2019-RB dated October 17, 2019 ), Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020 ( Notification no. FEMA.399/RB-2020 dated October 23, 2020 ) and A.P. (DIR Series) Circular No. 06 dated May 08, 2024 , as amended from time to time.
(1) These Directions shall be called the Master Direction – Reserve Bank of India (Margining for Non-Centrally Cleared OTC Derivatives) Directions, 2024.
(2) These Directions shall come into force on November 08, 2024.
(1) The provisions of these Directions shall apply to the following contracts, which are entered into on or after the date on which these Directions come into force:
(2) Genuine amendments, including the following, to an existing derivative contract entered into before the date on which these Directions come into force (‘grandfathered contract’) will not qualify as a new derivative contract under these Directions:
(1) In these Directions, unless the context otherwise requires:
Central counterparty means an entity that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the performance of open contracts.
Certificate of Deposit shall have the meaning assigned in paragraph 2(a)(iii) of the Master Direction – Reserve Bank of India (Certificate of Deposit) Directions, 2021 dated June 04, 2021 , as amended from time to time.
Commercial Paper shall have the meaning assigned in paragraph 2(a)(iv) of the Master Direction - Reserve Bank of India (Commercial Paper and Non-Convertible Debentures of original or initial maturity upto one year) Directions, 2024 dated January 03, 2024 , as amended from time to time.
Consolidated group means a group within the meaning of Indian Accounting Standard (Ind AS) 110 - Consolidated Financial Statements, or International Financial Reporting Standards (IFRS) 10 - Consolidated Financial Statements or any other equivalent accounting standards.
Collateralise to market means an approach to the exchange of Variation Margin wherein the exchanged margin is characterised as collateral to secure the current mark-to-market exposure between the parties to a derivative contract.
Financial sector regulator refers to the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA).
Initial margin means the collateral that is collected to cover the potential future exposure that could arise from future changes in the market value of a derivative contract during the time it takes to close out and/or replace the position in the event of a counterparty default.
Netting agreement shall have the same meaning as assigned to it in Section 2(1)(k) of The Bilateral Netting of Qualified Financial Contracts Act, 2020 (30 of 2020).
Non-centrally cleared derivatives (NCCDs) mean derivative contracts whose settlement is not guaranteed by a central counterparty.
Non-resident means and includes a ‘person resident outside India’ as defined in Section 2(w) of the Foreign Exchange Management Act, 1999 (42 of 1999).
Related parties shall have the same meaning as assigned to it under Indian Accounting Standard (Ind AS) 24 – Related Party Disclosures or International Accounting Standard (IAS) 24 – Related Party Disclosures or any other equivalent accounting standards.
Resident means and includes a ‘person resident in India’ as defined in Section 2(v) of the Foreign Exchange Management Act, 1999 (42 of 1999).
Settle to market means an approach to the exchange of Variation Margin wherein the exchanged margin is deemed to settle the current mark-to-market exposure between the parties to a derivative contract, with no right to reclaim and no obligation to return the Variation Margin. After the settlement, the mark-to-market exposure between the parties is reset to zero.
Variation margin means the collateral that is collected or paid to reflect the current mark-to-market exposure resulting from changes in the market value of a derivative contract.
Exceptions
