Aparna Lucknow, India 601 Questions 0 Answers 0 Best Answers 678 Points View Profile Aparna Asked: October 16, 20212021-10-16T20:57:30+05:30 2021-10-16T20:57:30+05:30In: Economics What are Interest Rate Derivatives? RBI issues draft Rupee interest rate derivatives. current affairsexternal sector Share Facebook 1 Answer Recent 0 Questions 518 Answers 176 Best Answers 0 Points View Profile [Deleted User] 2021-10-16T21:08:19+05:30Added an answer on October 16, 2021 at 9:08 pm Context: The Reserve Bank of India proposed allowing foreign portfolio investors (FPIs) to undertake exchange-traded rupee interest rate derivatives transactions subject to an overall ceiling of Rs 5,000 crore. Interest Rate Derivatives Interest Rate Derivatives (IRD) are contracts whose value is derived from one or more interest rates, prices of interest-rate instruments, or interest rate indices. These may include interest rate futures, options, swaps, swaptions, and FRA’s. Entities with interest rate risk can use these derivatives to hedge or minimize potential losses that may accompany a change in interest rates. Improve transparency Achieve better regulatory oversight. FPIs will be allowed FPIs may transact in permitted exchange-traded IRDs subject to the conditions that, at any point in time “the net long position of FPIs, collectively, and across all exchanges, in exchange-traded IRDs shall not exceed Rs 5,000 crore. Also, the net short position of an FPI on exchange-traded IRDs should not exceed its long position in government securities and other rupee debt securities. User classification: For the purpose of offering Rupee IRD contracts to a user, the market-maker (entities that provide bid and offer prices to users in order to provide liquidity to the market) should classify the user either as a retail user or as a non-retail user. Non-retail users are entities regulated by RBI, SEBI, IRDAI, or PFRDA; resident companies with a minimum net worth of Rs 500 crore; and non-residents, other than individuals. Any user who is not eligible to be classified as a non-retail user shall be classified as a retail user. The Proposal Local companies with a minimum net worth of `500 cr can participate. Retail participants can only hedge, but non-retail can use it for any purpose. Exchanges to decide on design and participants; in OTC, banks and primary dealers can participate. TFPIs can take exposure of up to `5,000 crores all put together 0 Reply Share Share Share on Facebook Share on Twitter Share on WhatsApp Leave an answerCancel replyYou must login or register to add a new answer. Related Questions What is Pathalgadi? What is Bodo Accord?
The Reserve Bank of India proposed allowing foreign portfolio investors (FPIs) to undertake exchange-traded rupee interest rate derivatives transactions subject to an overall ceiling of Rs 5,000 crore.
Interest Rate Derivatives
FPIs will be allowed