What changed
RBI clarified that standalone Primary Dealers can deal in Interest Rate Futures for both hedging and proprietary trading, subject to existing risk management and accounting guidelines. This builds on the 2009 IRF Directions and earlier circulars from 2003 and 2007.
What it means for you
Standalone PDs gain flexibility to manage interest rate risk on government securities portfolios through IRFs, while trading positions are allowed for own account. Banks with PD departments must follow separate DBOD guidelines. This expands hedging tools but keeps client trading off-limits.
What you must do
- Ensure IRF transactions comply with prudential norms from 2003 and 2007 circulars.
- Restrict IRF dealings to hedging and own-account trading; avoid client transactions.
- Review risk management and accounting frameworks for IRF positions.
- Banks with PD departments should follow DBOD guidelines for IRF activities.
Who it affects
Standalone Primary Dealers, Banks undertaking PD activities departmentally
Can standalone PDs trade IRFs for clients?
No, the circular explicitly allows IRF dealings only on own account, not on client’s account.
What guidelines govern IRF transactions for PDs?
PDs must follow risk management and accounting norms from June 2003 circulars and the comprehensive derivatives guidelines from April 2007.
Does this apply to banks with PD departments?
Banks undertaking PD activities departmentally should follow DBOD guidelines, not this standalone PD circular.