SPDs Allowed to Offer FCS-OIS to Non-Residents and Banks
Current · Source: Reserve Bank of India · RBI/2022-23/105 · issued 08 Aug 2022 · ~1 min read
Quick answerRBI now permits stand-alone primary dealers (SPDs) to offer Foreign Currency Settled Overnight Indexed Swaps (FCS-OIS) to non-residents, AD Cat-I banks, and other eligible SPDs, expanding their derivative market access.
The rule, in the simplest words
SPDs (stand-alone primary dealers, a type of financial firm that buys and sells government bonds) can now offer FCS-OIS (a special swap contract that pays based on overnight interest rates, settled in foreign currency) to non-residents (people or companies not living in India), AD Cat-I banks (banks with a special license to handle foreign money), and other SPDs.
Before this rule, only AD Cat-I banks could offer FCS-OIS to non-residents and other AD Cat-I banks; now SPDs can too.
This rule started right away on August 8, 2022, so SPDs can begin offering these swaps immediately.
SPDs must follow FEMA (Foreign Exchange Management Act, the law for foreign money deals) and RBI rules when doing these swaps.
How it plays out — a real example
A forex & trade-finance officer in Indore, Priya, works at an AD Cat-I bank. She wants to hedge against interest rate changes for a big loan to a foreign company. Now, she can call an SPD in Mumbai to buy an FCS-OIS swap, giving her more choices and better pricing than before.
What changed
Previously, only banks with AD Cat-I license could offer FCS-OIS to non-residents and other AD Cat-I banks. Now, stand-alone primary dealers (SPDs) authorized under section 10(1) of FEMA have also been granted this eligibility. The instructions are applicable with immediate effect.
What it means for you
This move broadens the participant base in the rupee interest rate derivatives market, allowing SPDs to hedge and trade more freely. For banks, it increases counterparty options and liquidity in FCS-OIS, potentially improving risk management and pricing efficiency.
What you must do
Update internal policies to recognize SPDs as eligible counterparties for FCS-OIS transactions.
Ensure compliance with FEMA and RBI directions when dealing with SPDs in these swaps.
Review risk management frameworks to account for expanded derivative trading with SPDs.
Who it affects
Stand-alone primary dealers (SPDs), Banks with AD Cat-I license, Non-resident entities trading in rupee derivatives
❓ Common questions
Why did RBI extend this to SPDs?
As announced in the August 2022 monetary policy statement, to permit SPDs to deal in FCS-OIS.
Does this circular replace earlier directions?
No, it reviews and updates the 2019 Rupee Interest Rate Derivatives Directions. Note that these directions have since been superseded by the 2025 Master Direction.
📜 Read the original circular — full text as issued by RBI
RBI/2022-23/105
FMRD.DIRD.05/14.03.046/2022-23
August 08, 2022
To,
All Eligible Market Participants
Madam / Sir,
Rupee Interest Rate Derivatives (Reserve Bank) Directions - Review
Please refer to Paragraph 4 of the Statement on Developmental and Regulatory Policies , issued as a part of the Bi-monthly Monetary Policy Statement for 2022-23 dated August 05, 2022 regarding permitting stand-alone primary dealers (SPDs) in India to deal in Foreign Currency Settled Overnight Indexed Swaps (FCS-OIS). Attention is also invited to the Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019 dated June 26, 2019 , as amended from time to time (hereinafter, Directions).
2. Banks in India having Authorised Dealer Category-I (AD Cat-I) license under FEMA, 1999 have been permitted under the above Directions to offer FCS-OIS to persons not resident in India as well as to other AD Cat-I banks vide circular FMRD.DIRD.12/14.03.046/2021-22 dated February 10, 2022 . On a review, it has been decided that SPDs, authorized under section 10(1) of FEMA, 1999 shall also be eligible to offer FCS-OIS to persons not resident in India as well as to other AD Cat-I banks and eligible SPDs.
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.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2022-23/105 · issued 08 Aug 2022. The plain-English explanation above is BankPulse’s own independent summary.
Update internal policies to recognize SPDs as eligible counterparties for FCS-OIS transactions.
📜 Compliance
Ensure compliance with FEMA and RBI directions when dealing with SPDs in these swaps.
Review risk management frameworks to account for expanded derivative trading with SPDs.
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 Branch Manager at a bank this circular applies to (Stand-alone primary dealers (SPDs), Banks with AD Cat-I license, Non-resident entities trading in rupee derivatives), your first concrete step on “SPDs Allowed to Offer FCS-OIS to Non-Residents and Banks” is: “Update internal policies to recognize SPDs as eligible counterparties for FCS-OIS transactions.” (RBI issued this 08 Aug 2022).
Circular: RBI/2022-23/105 -- SPDs Allowed to Offer FCS-OIS to Non-Residents and Banks
Issued: 08 Aug 2022
Action required: Update internal policies to recognize SPDs as eligible counterparties for FCS-OIS transactions.
Action required: Ensure compliance with FEMA and RBI directions when dealing with SPDs in these swaps.
Action required: Review risk management frameworks to account for expanded derivative trading with SPDs.
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=12374&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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