What changed
RBI updated the Master Direction on Credit Derivatives (2022) and the Repo Directions (2018) to explicitly include NaBFID as an eligible AIFI. Previously, NaBFID's participation was implied but not formally listed in these Directions.
What it means for you
NaBFID can now legally undertake credit default swap and repo transactions under RBI's regulatory framework, expanding its toolkit for liquidity and risk management. For other market participants, this adds a new, well-capitalized counterparty in these markets, potentially deepening liquidity.
What you must do
- Update internal counterparty eligibility lists to include NaBFID for CDS and repo transactions.
- Review credit and operational risk policies to account for NaBFID as a new AIFI counterparty.
- Ensure compliance teams note the updated Master Directions for any transaction referencing NaBFID.
Who it affects
All eligible market participants in CDS and repo markets, NaBFID, Banks and financial institutions dealing with NaBFID
When does this become effective?
The circular is applicable with immediate effect from the date of issuance, January 1, 2025.