RBI/FMRD/2025-26/380
FMRD.DIRD.No.06/14.03.046/2025-26
December 08, 2025
To
All participants in Rupee interest rate derivatives markets
Dear Sir/Madam,
Master Direction – Reserve Bank of India (Rupee Interest Rate Derivatives) Directions, 2025
Please refer to press release dated June 16, 2025, inviting stakeholder comments/feedback on the Draft Master Direction - Reserve Bank of India (Rupee Interest Rate Derivatives) Directions, 2025.
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Based on the feedback received, the Directions have since been finalised and issued herewith.
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These Directions have been issued by the Reserve Bank in exercise of the powers conferred under section 45W of the Reserve Bank of India Act, 1934, and of all the powers enabling it in this behalf.
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These Directions shall be applicable from March 01, 2026.
Yours faithfully
(Dimple Bhandia)
Chief General Manager
RESERVE BANK OF INDIA
FINANCIAL MARKETS REGULATION DEPARTMENT
9th FLOOR, CENTRAL OFFICE BUILDING, FORT
MUMBAI 400 001
Notification No. FMRD.DIRD.07/14.03.046/2025-26 dated December 08, 2025
Master Direction - Reserve Bank of India (Rupee Interest Rate Derivatives) Directions, 2025
In exercise of the powers conferred under section 45W of the Reserve Bank of India Act, 1934 (hereinafter called the Act) read with section 45U of the Act and in supersession of the Directions indicated in Annex-I, the Reserve Bank of India (hereinafter called the Reserve Bank) hereby issues the following Directions. A reference is also invited to the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 (Notification No. FEMA 1/2000-RB dated May 03, 2000) and Foreign Exchange Management (Debt Instruments) Regulations, 2019 (Notification No. FEMA 396/2019-RB dated October 17, 2019), as amended from time to time.
- Short title, scope and commencement of the Directions
1.1 These Directions shall be called the Master Direction - Reserve Bank of India (Rupee Interest Rate Derivatives) Directions, 2025 (hereinafter, the Directions).
1.2 These Directions shall be applicable to Rupee interest rate derivatives (IRD) transactions undertaken in the over-the-counter (OTC) market and on recognised stock exchanges in India.
Provided that Forward Contracts in Government Securities shall be undertaken in the OTC market in terms of the Reserve Bank of India (Forward Contracts in Government Securities) Directions, 2025, dated February 21, 2025.
1.3 These Directions shall come into force from March 01, 2026.
- Definitions
2.1 In these Directions, unless the context otherwise requires:
- (i) ‘Back-to-back arrangement’ means an arrangement under which an overseas entity (including overseas branches, IFSC Banking Units (IBUs), wholly owned subsidiaries or joint ventures of market-makers) undertakes a transaction with a non-resident and immediately enters into an off-setting transaction with the market-maker in India. In the case of foreign banks operating in India, the back-to-back arrangement may be through any branch of the parent bank.
- (ii) ‘Benchmark Interest Rate’ means an interest rate administered by a Financial Benchmark Administrator.
- (iii) ‘Company’ shall have the same meaning as assigned to it in section 2 (20) of the Companies Act, 2013 (18 of 2013).
- (iv) ‘Electronic Trading Platform (ETP)’ shall have the same meaning as assigned to it in paragraph 2(a)(ii) of the Master Direction – Reserve Bank of India (Electronic Trading Platforms) Directions, 2025, dated June 16, 2025, as amended from time to time.
- (v) ‘European Interest Rate Call / Put Option’ means an interest rate call / put option contract that can be exercised only on the expiration date.
- (vi) ‘Financial Benchmark Administrator’ (FBA) means a person who controls the creation, operation and administration of financial benchmark(s) authorised under Reserve Bank of India (Financial Benchmark Administrators) Directions, 2023, dated December 28, 2023, as amended from time to time.
- (vii) ‘Foreign Currency Settled Interest Rate Derivative (FCS-IRD)’ means a Rupee interest rate derivative contract whose settlement currency is a currency other than the Indian Rupee (INR).
- (viii) ‘Foreign Portfolio Investor (FPI)’ means a person registered in accordance with the provisions of the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, as amended from time to time.
- (ix) ‘Forward Rate Agreement (FRA)’ means a cash-settled OTC derivative contract between two counterparties, in which a buyer will pay or receive, on the settlement date, the difference between a pre-determined fixed rate (FRA rate) and a predetermined floating interest rate / price / index, applied on a notional principal amount, for a specified forward period.
- (x) ‘Interest rate call / put option’ means an interest rate option that gives the buyer the right, but not the obligation, to buy / sell an interest rate instrument or receive / pay an interest rate on a notional principal at a pre-determined price/rate on or before a specified expiration date in the future.
- (xi) ‘Interest rate cap’ means a series of interest rate call options (called caplets) in which the buyer of the option receives a payment at the end of each period when the underlying interest rate is above a rate agreed in advance (strike rate).
- (xii) ‘Interest rate collar’ means a derivative contract where a market participant simultaneously purchases an interest rate cap and sells an interest rate floor on the same interest rate for the same maturity and notional principal amount.
- (xiii) ‘Interest rate floor’ means a series of interest rate put options in which the buyer of the option receives a payment at the end of each period when the underlying interest rate is below the strike rate.
- (xiv) ‘Interest rate futures’ means a standardised interest rate derivative contract, traded on a recognised stock exchange, to buy or sell a notional security or any other interest-bearing instrument or an index of such instruments or interest rates at a specified future date, at a price determined at the time of the contract. Interest Rate Futures include Money Market Futures.
- (xv) ‘Interest rate swap’ means a derivative contract that involves exchange of a stream of agreed interest payments on a `notional principal’ amount during a specified period.
- (xvi) ‘Interest rate swaption’ means an option on an interest rate swap(s) which gives the buyer the right, but not the obligation, to enter into an interest rate swap.
- (xvii) ‘Government Securities’ shall have the same meaning as defined in section 2(f) of the Government Securities Act, 2006 (38 of 2006).
- (xviii) ‘Hedging’ means the activity of undertaking a derivative transaction to reduce Rupee interest rate risk at the balance sheet level or the portfolio level or at individual asset or liability level.
- (xix) ‘Interest Rate Derivative’ means a financial derivative contract whose value is derived from one or more Rupee interest rates, prices of Rupee interest rate instruments, or Rupee interest rate indices.
- (xx) ‘Leveraged derivative’ means an OTC derivative contract whose potential pay-out during the tenure of the contract can be more than the notional amount of the contract or whose pay-out calculation involves effective multiplication, by a factor of more than 1.0, of either the notional amount or the underlying interest rate / price / index.
- (xxi) ‘Market-maker’ means an entity which provides prices to users and other market-makers. Market-makers need not have an underlying risk.
- (xxii) ‘Money Market Futures’ means an interest rate future based on any rupee denominated money market interest rate or money market instrument.
- (xxiii) ‘Net-worth’ shall have the same meaning assigned to it in section 2(57) of the Companies Act, 2013, as amended from time to time.
- (xxiv) ‘Non-resident’ means and includes a ‘person resident outside India’ as defined in section 2 (w) of Foreign Exchange Management Act, 1999 (42 of 1999).
- (xxv) ‘Over-the-counter (OTC) market’ refers to a market where derivative transactions are undertaken in any manner other than on exchanges and shall include those undertaken on electronic trading platforms (ETPs).
- (xxvi) ‘Recognised Stock Exchange’ shall have the same meaning as assigned to it in section 2(f) of the Securities Contract Regulation Act, 1956 (42 of 1956).
- (xxvii) ‘Related Party’ shall have the same meaning as assigned to it under Para-9 of Indian Accounting Standard (Ind AS) 24 – Related Party Disclosures or Para-9 of International Accounting Standard (IAS) 24 – Related Party Disclosures or any other equivalent accounting standards. Provided that the term ‘related party’ shall exclude associates, as specified in Ind AS 24 or IAS 24 or any other equivalent accounting standard.
- (xxviii) ‘Resident’ means and includes a ‘person resident in India’ as defined in section 2 (v) of Foreign Exchange Management Act, 1999 (42 of 1999).
- (xxix) ‘Reverse interest rate collar’ means a derivative contract which involves simultaneous purchase of an interest rate floor and sale of an interest rate cap on the same interest rate for the same maturity and notional principal amount.
- (xxx) ‘Turnover’ shall have the same meaning as assigned to it in section 2(91) of the Companies Act, 2013, as amended from time to time.
- (xxxi) ‘User’ refers to a person who undertakes derivative transactions other than as a market-maker.
