What changed
RBI has expanded the scope of Rupee Interest Rate Derivatives by allowing banks with AD Cat-I license to deal in foreign currency settled Overnight Indexed Swaps (FCS-OIS) based on the FBIL MIBOR benchmark. These transactions can now be offered to persons not resident in India and other AD Cat-I banks, and can be executed through onshore branches, IFSC Banking Units, or foreign branches. Banks can also undertake these swaps beyond onshore market hours.
What it means for you
This move deepens the rupee interest rate derivative market by enabling non-resident participation in MIBOR-linked OIS, which can improve hedging options and liquidity. For banks, it opens a new revenue stream and allows them to manage interest rate risk more flexibly across different time zones and jurisdictions. The inclusion of IFSC and foreign branches aligns with India's efforts to integrate its financial markets globally.
What you must do
- Review and update your bank's internal policies and risk management frameworks to include FCS-OIS transactions.
- Ensure your AD Cat-I license and FEMA compliance are current before offering these products.
- Train treasury and derivatives teams on the operational and regulatory nuances of foreign currency settled OIS.
- Coordinate with IFSC Banking Units and foreign branches to enable seamless execution of FCS-OIS beyond onshore hours.
Who it affects
AD Cat-I banks in India, Treasury and derivatives desks, Non-resident entities seeking rupee interest rate hedges, IFSC Banking Units (IBUs), Foreign branches of Indian banks and parent banks of foreign banks
What is the benchmark rate for these FCS-OIS?
The FCS-OIS must be based on the Overnight Mumbai Interbank Outright Rate (MIBOR) published by Financial Benchmarks India Pvt. Ltd. (FBIL).
Can we offer FCS-OIS to resident Indian entities?
No, the circular specifically permits these transactions only with persons not resident in India and other AD Cat-I banks. Resident entities are not covered under this relaxation.
Are these directions still valid given the 2025 Master Direction?
The source circular notes it has been superseded by the Master Direction – Reserve Bank of India (Rupee Interest Rate Derivatives) Directions, 2025. You should refer to the latest master direction for current applicability.