What changed
RBI finalized the draft Directions released in December 2020, incorporating public feedback, and issued a consolidated Master Direction under Section 45W of the RBI Act. The new framework replaces the earlier Comprehensive Guidelines on Derivatives (CGD) and comes into force on January 3, 2022.
What it means for you
The Direction consolidates and updates the regulatory framework for eligible market participants acting as market-makers in OTC derivatives, replacing the earlier Comprehensive Guidelines on Derivatives (CGD). It provides clear definitions and operational requirements, effective January 3, 2022.
What you must do
- Review the full Master Direction to understand updated definitions and compliance requirements.
- Ensure compliance with the Direction's provisions by the effective date of January 3, 2022.
- Train relevant staff on new product definitions as defined in the Direction.
- Align all OTC derivative market-making activities with the Direction's provisions.
Who it affects
All eligible market participants permitted to act as market-makers in OTC derivatives, Entities dealing in rupee interest rate and foreign exchange derivatives as per Governing Directions
When does this Master Direction take effect?
The Direction comes into force on January 3, 2022, as stated in paragraph 1.2.
What products are defined under this Direction?
It defines bond forwards, credit default swaps, currency swaps, foreign exchange forwards, and foreign exchange call options (European), among others.
Does this Direction replace the earlier Comprehensive Guidelines on Derivatives?
Yes, it replaces the CGD as part of the review announced in the December 2020 monetary policy statement.