Master Direction – Reserve Bank of India (Margining for Non-Centrally Cleared OTC Derivatives) Directions, 2024 (Updated as on February 21, 2025)
UR
- Applies toAll regulated entities
- StatusIn force
- IssuedMay 08, 2024
- Amendmentsnone tracked
- Length30 points in 3 sections · 3 min read
The four dates on this rule
- PublishedMay 08, 2024The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNovember 08, 2024The day this rule starts to apply, as RBI's own text states it.
- Time to get ready184 daysThe room between the day it was published and the day it starts to apply.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| ₹25,000 crore | A regulated firm, such as a bank, crosses this rule once its derivative book reaches ₹25,000 crore. RBI Para 4(1) |
| ₹60,000 crore | A bigger threshold, ₹60,000 crore, applies to other resident entities. RBI Para 4(1) |
| 10 working days | Initial margin must be reworked at least once every 10 working days. RBI Para 5(1) |
| ₹4.5 crore | Margin below ₹4.5 crore need not be exchanged at all. RBI Para 6(4) |
| eight per cent | Collateral posted in the wrong currency gets an extra eight per cent haircut, a bigger discount on its value. RBI Para 10(6) |
What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Must know
1. Starts from 8 November 2024
These rules apply to trades made from 8 November 2024 onward.
2. Old trades are not caught
A trade made before this rule started is not pulled in just for a small later tweak.
3. Covers non-cleared derivative trades
This rule covers derivative trades that are not settled through a central counterparty, called NCCDs.
4. ₹25,000 crore threshold for banks
A regulated firm, such as a bank, crosses this rule once its derivative book reaches ₹25,000 crore.
5. ₹60,000 crore for other firms
A bigger threshold, ₹60,000 crore, applies to other resident entities.
6. USD 3 billion threshold abroad
Foreign financial firms cross this rule at USD 3 billion.
7. USD 8 billion, other firms
Other foreign entities cross this rule at a higher mark, USD 8 billion.
8. Also decides initial margin duty
The same ₹60,000 crore level also decides who must exchange initial margin.
9. Higher mark: USD 8 billion
Bigger foreign entities must cross USD 8 billion before this initial-margin duty applies to them.
10. Variation margin checked daily
Variation margin must be worked out every single day.
11. Reworked within 10 working days
Initial margin must be reworked at least once every 10 working days.
12. Minimum transfer amount: ₹4.5 crore
Margin below ₹4.5 crore need not be exchanged at all.
13. Margin sent quickly to counterparty
Margin must be sent to the other side as soon as possible after the trade.
14. Not treated as a deposit
Cash collateral held as variation margin is not treated like a bank deposit.
15. Variation margin can be reused
Unlike initial margin, variation margin collateral may be re-used by whoever holds it.
16. Margin must be ready fast
Initial margin must be ready for the collecting side to use quickly if the other side defaults.
17. Margin still belongs to poster
The initial margin still belongs to the side that posted it, not the side holding it.
18. Kept apart from other money
Initial margin must be kept apart from the money of the firm collecting it.
19. Initial margin cannot be reused
The firm keeping your initial margin cannot lend it out or reuse it for anything else.
20. Interest goes to the poster
Any interest earned on initial margin belongs to the side that posted it.
21. Banks or CCIL hold margin
Only Scheduled Commercial Banks or CCIL, a clearing body, may hold initial margin paid in India.
22. Foreign providers must be authorised
A firm using a foreign safe-keeper must make sure that firm is properly authorised there.
23. Wrong-currency collateral costs more
Collateral posted in the wrong currency gets an extra eight per cent haircut, a bigger discount on its value.
24. No collateral from either side
You cannot use securities issued by the other side, or its related parties, as collateral.
25. Controls needed for collateral risk
Firms must have controls for the risks that come with the collateral they receive.
26. Collateral can be swapped later
Posted collateral can later be swapped for different eligible collateral.
27. Can refuse a bad jurisdiction
A firm can refuse to exchange margin if it seriously doubts the arrangement is enforceable in that country.
28. Dispute policy must exist first
Firms must have a policy for handling disputes before they even start trading.
29. Pay the undisputed part first
If there is a dispute, both sides must first exchange the amount that is not in question.
30. RBI can demand information
RBI can ask any firm involved in these trades for information at any time.