Current · Source: Reserve Bank of India · RBI/2009-10/165 · issued 18 Sep 2009 · ~2 min read
Quick answerRBI permits NBFCs (excluding RNBCs) to trade Interest Rate Futures on SEBI-recognized exchanges as clients for hedging underlying exposures. Half-yearly reporting to the regional DNBS office is mandatory within one month of half-year end.
The rule, in the simplest words
NBFCs (Non-Banking Financial Companies, like loan companies that are not banks) can now trade Interest Rate Futures (IRFs, a type of contract that bets on future interest rates) on SEBI-recognized exchanges (stock market places approved by India's market regulator).
They can only use IRFs to hedge (protect against) interest rate risk on their existing loans or investments, not for guessing or making extra money.
Every six months, they must send a report to the RBI's regional office within one month after the half-year ends, showing how many IRF trades they did and the amounts involved.
How it plays out — a real example
Ravi, a compliance officer at a mid-sized NBFC in Pune, sets up a new system to track every Interest Rate Futures trade his company makes. He ensures each trade is linked to a specific loan portfolio to prove it's for hedging, not speculation. At the end of September, he collects the data and submits the half-yearly report to the RBI's regional office by October 31, keeping his company compliant and its balance sheet safer from interest rate swings.
What changed
RBI issued a circular allowing NBFCs to participate in Interest Rate Futures (IRFs) on recognized exchanges as clients, solely for hedging purposes. This follows the broader IRF framework introduced via Notification No. FMD. 1 /ED(VKS) - 2009 dated August 28, 2009. NBFCs must now submit half-yearly data on IRF transactions to the regional DNBS office.
What it means for you
NBFCs can now use IRFs to hedge interest rate risk on their underlying exposures, aligning with SEBI and RBI guidelines. This provides a risk management tool previously unavailable to them. Banks lending to or transacting with NBFCs should note that their counterparties may now have better hedged balance sheets, potentially reducing credit risk. Compliance teams must ensure timely half-yearly reporting to avoid regulatory gaps.
What you must do
Review your NBFC's eligibility to trade IRFs as a client on SEBI-recognized exchanges.
Set up internal processes to capture IRF transaction data (number of transactions, notional principal, short/long positions) for half-yearly reporting.
Submit the prescribed format to the regional DNBS office within one month of each half-year end.
Ensure IRF trading is strictly for hedging underlying exposures, not speculation.
Who it affects
All NBFCs (excluding RNBCs), Regional offices of Department of Non-Banking Supervision (DNBS), SEBI-recognized exchanges offering Interest Rate Futures
❓ Common questions
Can NBFCs use Interest Rate Futures for speculation?
No, the circular explicitly permits IRF participation only for hedging underlying exposures. Speculative trading is not allowed.
What data must NBFCs report half-yearly?
NBFCs must report the number of IRF transactions, notional principal amount in rupees, and break them into short and long positions using the format provided in the circular.
Where should the half-yearly report be submitted?
The report must be sent to the Regional office of the Department of Non-Banking Supervision (DNBS) under whose jurisdiction the NBFC is registered, within one month of the half-year end.
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/165
DNBS.PD.CC.No.161/3.10.01/ 2009-10
September 18, 2009
All NBFCs (excluding RNBCs)
Dear Sir
Introduction of Interest Rate Futures- NBFCs
Please refer to the Directions issued by the Reserve Bank of India in terms of Notification No. FMD. 1 /ED(VKS) - 2009 dated August 28, 2009 , covering the framework for trading of Interest Rate Futures (IRFs) in recognized exchanges in India .
2. It has been decided that NBFCs may participate in the designated interest rate futures exchanges recognized by SEBI, as clients , subject to RBI / SEBI guidelines in the matter, for the purpose of hedging their underlying exposures.
3. NBFCs participating in IRF exchanges may submit the data in this regard half yearly, in the format enclosed, to the Regional office of the Department of Non-Banking Supervision in whose jurisdiction their company is registered, within a period of one month from the close of the half year.
Yours sincerely,
(A Narayana Rao)
Chief General Manager-in-Charge
Encl: as above
Interest Rate futures transactions for the purpose of hedging by NBFCs – Statement for the Half-year ended……….
Name of the NBFC:
Interest Rate Futures
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/165 · issued 18 Sep 2009. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (All NBFCs (excluding RNBCs), Regional offices of Department of Non-Banking Supervision (DNBS), SEBI-recognized exchanges offering Interest Rate Futures), your first concrete step on “NBFCs Allowed to Hedge with Interest Rate Futures” is: “Review your NBFC's eligibility to trade IRFs as a client on SEBI-recognized exchanges.” (RBI issued this 18 Sep 2009).
Circular: RBI/2009-10/165 -- NBFCs Allowed to Hedge with Interest Rate Futures
Issued: 18 Sep 2009
Action required: Review your NBFC's eligibility to trade IRFs as a client on SEBI-recognized exchanges.
Action required: Set up internal processes to capture IRF transaction data (number of transactions, notional principal, short/long positions) for half-yearly reporting.
Action required: Submit the prescribed format to the regional DNBS office within one month of each half-year end.
Action required: Ensure IRF trading is strictly for hedging underlying exposures, not speculation.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5281&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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