Credit Default Swaps Notified as Derivatives under RBI Act
No longer current — replaced by Credit Default Swaps (CDS) for Corporate Bonds (Directions, 2022)
Source: Reserve Bank of India · RBI/2011-12/227 · issued 19 Oct 2011 · ~1 min read
Quick answerRBI has officially notified Credit Default Swaps (CDS) as a derivative under Chapter IIID of the RBI Act, 1934, effective October 19, 2011, to regulate the financial system and protect public interest.
What changed
RBI issued a notification under Sections 45U(a) and 45V of the RBI Act, 1934, specifying Credit Default Swaps as a derivative. This brings CDS under the regulatory framework of Chapter IIID of the Act, which governs derivatives.
What it means for you
Banks and market participants can now legally deal in Credit Default Swaps as recognized derivatives, subject to RBI oversight. This formalizes CDS as a tool for hedging credit risk, enhancing market depth and risk management options for lenders.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Review internal policies to align CDS trading with RBI's derivative regulations under Chapter IIID.
Ensure compliance with reporting and documentation requirements for CDS transactions.
Train treasury and risk management teams on CDS mechanics and regulatory obligations.
Update risk management frameworks to include CDS as a recognized hedging instrument.
Who it affects
All market participants including banks, primary dealers, and financial institutions, Treasury and risk management departments, Compliance and legal teams handling derivative products
❓ Common questions
Regulatory timeline
Stated effective dateeffective October 19, 2011
Decoded by BankPulse2026-06-18 23:07 IST
Superseded by — Credit Default Swaps (CDS) for Corporate Bonds (Directions, 2022)
Status change: superseded03 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the legal basis for this notification?
RBI used powers under Sections 45U(a) and 45V of the RBI Act, 1934, to specify Credit Default Swaps as a derivative for Chapter IIID.
Does this notification allow trading in CDS immediately?
Yes, the notification took effect on October 19, 2011, making CDS a recognized derivative under RBI regulation from that date.
What are the implications for banks?
Banks can now use CDS for credit risk hedging within the regulatory framework, requiring updated policies, compliance, and risk management practices.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Superseded byCredit Default Swaps (CDS) for Corporate Bonds (Directions, 2022)
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/227
IDMD.PCD. 11 /14.03.04/2011-12
October 19, 2011
All market participants
Dear Sir/Madam,
Notification of Credit Default Swaps as a derivative under Reserve Bank of India Act, 1934
Reserve Bank of India having considered it necessary in public interest and to regulate the financial system of the country to its advantage, in exercise of powers conferred under Sections 45 U (a) and 45 V of the RBI Act, 1934 has issued notification specifying Credit Default Swap as a derivative for the purposes of Chapter IIID of the said Act.
2. A copy of the said notification IDMD.PCD.10 /ED (RG) - 2011 dated October 19, 2011 is enclosed.
Yours faithfully,
(Sanjay Hansda)
Director
RESERVE BANK OF INDIA
INTERNAL DEBT MANAGEMENT DEPARTMENT
23rd FLOOR, CENTRAL OFFICE, FORT
MUMBAI 400 001
NOTIFICATION
IDMD.PCD. 10 /ED (RG) - 2011 dated October 19, 2011
In exercise of powers conferred by Sections 45U (a) and 45V of the Reserve Bank of India Act, 1934 [Act No 2 of 1934], the Reserve Bank hereby specifies Credit Default Swap as a derivative for the purposes of Chapter IIID of the said Act.
(R. Gandhi)
Executive Director
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/227 · issued 19 Oct 2011. The plain-English explanation above is BankPulse’s own independent summary.
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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=6768&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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