What changed
The Directions finalise the framework for credit derivatives, including credit indices and total return swaps on corporate bonds, as announced in the February 2026 monetary policy. They replace the 2022 Master Direction and related circular, with immediate effect from June 25, 2026.
What it means for you
Banks and market participants now have a comprehensive regulatory framework for trading credit derivatives, including new products like credit indices and total return swaps. This enhances risk management and liquidity in the corporate bond market, but requires compliance with updated definitions, settlement mechanisms, and counterparty rules.
What you must do
- Review the full Master Direction to understand new product eligibility and settlement procedures.
- Update internal policies and risk management systems to align with the 2026 framework.
- Ensure all credit derivative transactions comply with OTC and exchange-trading requirements.
- Train staff on revised definitions, including auction and cash settlement processes.
Who it affects
All participants in credit derivatives markets, Banks and financial institutions dealing in corporate bonds, Stock exchanges and clearing corporations, NBFCs and other eligible entities
When do these Directions take effect?
They are effective from June 25, 2026, with immediate applicability.
What products are covered under the new Directions?
Credit default swaps, credit indices, and total return swaps on corporate bonds, traded OTC or on recognised stock exchanges.
Do these Directions replace previous guidelines?
Yes, they supersede the 2022 Master Direction and related circular on credit derivatives.
