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RBI Expands Derivative Access for Small Finance Banks

No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2024-25/23 · issued 23 Apr 2024 · ~1 min read
Quick answerRBI now allows Small Finance Banks to deal in permissible rupee interest rate derivative products for hedging, beyond just Interest Rate Futures. This expands their tools to manage interest rate risk more effectively.

What changed

Previously, Small Finance Banks could only use Interest Rate Futures for proprietary hedging. Now, they are permitted to deal in all permissible rupee interest rate derivative products as per the Rupee Interest Rate Derivatives Directions, 2019, effective immediately.

What it means for you

SFBs gain greater flexibility to hedge interest rate risk across their balance sheets and commercial operations. This reduces reliance on a single instrument and allows more tailored risk management, potentially improving financial stability and lending capacity.

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

Who it affects

Small Finance Banks, Treasury departments of SFBs, Risk management teams at SFBs

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What derivative products are now allowed for SFBs?

SFBs can now deal in all permissible rupee interest rate derivative products as defined in the Rupee Interest Rate Derivatives Directions, 2019, not just Interest Rate Futures.

When does this change take effect?

The circular is effective immediately from April 23, 2024.

Can SFBs use these derivatives for trading or speculation?

No, the permission is specifically for hedging interest rate risk in their balance sheet and commercial operations, not for proprietary trading or speculation.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #119: DOR.MRG.REC.15/00.00.018/2024-25 — "Dealing in Rupee Interest Rate Derivative Products - Small Finance Banks" dated April 23, 2024”
📜 Read the original circular — full text as issued by RBI
RBI/2024-25/23 DOR.MRG.REC.15/00.00.018/2024-25 April 23, 2024 Dealing in Rupee Interest Rate Derivative products - Small Finance Banks Please refer to paragraph 4 of Statement on Developmental and Regulatory Policies issued as a part of the Bi-monthly Monetary Policy Statement for 2024-25 dated April 05, 2024 read with Paragraph 1.10 of the 'Operating Guidelines for Small Finance Banks' dated October 6, 2016 . 2. Extant guidelines permit Small Finance Banks (SFBs) to use only Interest Rate Futures (IRFs) for the purpose of proprietary hedging. In order to expand the avenues available to the SFBs for hedging interest rate risk in their balance sheet and commercial operations more effectively as well as with a view to provide them with greater flexibility, it has now been decided to allow them to deal in permissible rupee interest rate derivative products for hedging interest rate risk in terms of the Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019 dated June 26, 2019 , as amended from time to time. Applicability 3. This circular is applicable to all Small Finance Banks. 4. These instructions shall come into force with immediate effect. Yours faithfully, (Usha Janakiraman) Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2024-25/23 · issued 23 Apr 2024. The plain-English explanation above is BankPulse’s own independent summary.
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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12668&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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