Current · Source: Reserve Bank of India · RBI/2021-22/157 · issued 10 Feb 2022 · ~2 min read
Quick answerRBI now permits AD Cat-I banks to offer foreign currency settled Overnight Indexed Swaps (FCS-OIS) based on FBIL's MIBOR to non-residents and other AD Cat-I banks, including via IFSC and foreign branches, effective immediately.
The rule, in the simplest words
AD Cat-I banks can offer foreign currency settled Overnight Indexed Swaps (FCS-OIS) to non-residents and other AD Cat-I banks.
FCS-OIS transactions can be executed through onshore branches, IFSC Banking Units, or foreign branches.
Banks can undertake FCS-OIS transactions beyond onshore market hours.
How it plays out — a real example
Rahul, a branch operations officer in Indore, helps a foreign client hedge against interest rate risk by offering them a foreign currency settled Overnight Indexed Swap (FCS-OIS) based on the FBIL MIBOR benchmark. This allows the client to manage their risk more flexibly across different time zones and jurisdictions, while also deepening the rupee interest rate derivative market.
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
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-18 06:58 IST
Supersedes — Master Direction for Rupee Interest Rate Derivatives
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
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.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
SupersedesMaster Direction for Rupee Interest Rate Derivatives
📜 Read the original circular — full text as issued by RBI
RBI/2021-22/157
FMRD.DIRD.12/14.03.046/2021-22
February 10, 2022
To,
All Eligible Market Participants
Madam / Sir,
Rupee Interest Rate Derivatives (Reserve Bank) Directions - Review
Please refer to Paragraph 5 of the Statement on Developmental and Regulatory Policies , issued as a part of the sixth Bi-monthly Monetary Policy Statement for 2021-22 dated February 10, 2022 regarding permitting banks in India to deal in foreign currency settled Overnight Indexed Swaps (OIS). Attention is also invited to the Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019 dated June 26, 2019 (hereinafter, Directions).
2. Banks in India having Authorised Dealer Category-I (AD Cat-I) license under FEMA, 1999, shall be eligible to offer Foreign Currency Settled OIS (FCS-OIS) based on the Overnight Mumbai Interbank Outright Rate (MIBOR) benchmark published by Financial Benchmarks India Pvt. Ltd. (FBIL) to persons not resident in India as well as to other AD Cat-I banks. Banks can undertake these transactions through their branches in India, through their International Financial Services Centre (IFSC) Banking Units (IBUs) or through their foreign branches (in case of foreign banks operating in India, through any branch of the parent bank). Banks may undertake FCS-OIS transactions beyond onshore market hours.
3. The instructions shall be applicable with immediate effect. The updated Directions are attached.
4. The instructions contained in this circular have been issued in exercise of the powers conferred under section 45W of the Reserve Bank of India Act, 1934 read with section 45U of the Act and of all the powers enabling it in this behalf. A reference is also invited to the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 ( Notification No. FEMA 1/2000-RB dated May 03, 2000 ) and Foreign Exchange Management (Debt Instruments) Regulations, 2019 ( Notification No. FEMA 396/2019-RB dated October 17, 2019 ), as amended from time to time.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-22/157 · issued 10 Feb 2022. The plain-English explanation above is BankPulse’s own independent summary.
Coordinate with IFSC Banking Units and foreign branches to enable seamless execution of FCS-OIS beyond onshore hours.
📜 Compliance
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.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (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), your first concrete step on “RBI allows foreign currency settled OIS for banks” is: “Review and update your bank's internal policies and risk management frameworks to include FCS-OIS transactions.” (RBI issued this 10 Feb 2022).
Action required: Review and update your bank's internal policies and risk management frameworks to include FCS-OIS transactions.
Action required: Ensure your AD Cat-I license and FEMA compliance are current before offering these products.
Action required: Train treasury and derivatives teams on the operational and regulatory nuances of foreign currency settled OIS.
Action required: Coordinate with IFSC Banking Units and foreign branches to enable seamless execution of FCS-OIS beyond onshore hours.
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=12229&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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