Master Direction – Reserve Bank of India (Credit Derivatives) Directions, 2026
UR
- Applies toAll regulated entities
- StatusIn force
- RBI text changedRBI updated this document on September 22, 2026. BankPulse is re-reading it. BankPulse checked all 29 points on this page against RBI's new text on 2 October 2026. Every quoted line is still in RBI's text.
- IssuedJun 25, 2026
- Amendmentsnone tracked
- Length29 points in 4 sections · 3 min read
The four dates on this rule
- PublishedJun 25, 2026The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyJun 25, 2026The day this rule starts to apply, as RBI's own text states it.
- Time to get readyNoneIt starts to apply on the day it was published.
- 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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28 of the 29 points name no product and bind every product. All products.
Numbers to remember
| June 25, 2026 | These rules came into force on June 25, 2026. RBI Para 1 |
| ₹500 crore | A company needs net worth of ₹500 crore or turnover of ₹1,000 crore to count as non-retail. RBI Para 4 |
| 5 per cent | Foreign investors together may not sell CDS protection above 5 per cent of corporate bonds outstanding. RBI Para 4 |
| one month | RBI can bar a rule-breaker from this market for up to one month at a time. RBI Para 11 |
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. OTC and exchange trades covered
The rules cover credit derivatives traded over the counter and on stock exchanges in India.
2. Rules started 25 June 2026
These rules came into force on June 25, 2026.
3. Only residents and eligible outsiders
Only residents, and outsiders these rules name, may trade credit derivatives.
4. Small banks cannot be market-makers
Small finance banks, payment banks, local area banks and regional rural banks cannot be market-makers.
5. A market-maker must be involved
At least one party to every trade must be a market-maker or an approved central counterparty.
6. Net worth or turnover threshold
A company needs net worth of ₹500 crore or turnover of ₹1,000 crore to count as non-retail.
7. Retail users may only hedge
A retail user, other than an individual, may buy protection only to hedge a real exposure.
8. FPI protection sales capped 5%
Foreign investors together may not sell CDS protection above 5 per cent of corporate bonds outstanding.
9. No CDS contract for individuals
A market-maker may never offer a CDS contract to an individual.
10. No TRS contract for individuals
A market-maker may never offer a TRS contract to an individual either.
11. Committee's decisions bind everyone
The committee's decision binds every trader in this market.
12. Exchange retail users must hedge
A retail user trading exchange-listed CDS may do so only to hedge a real exposure.
13. A violator can be barred
RBI can bar a rule-breaker from this market for up to one month at a time.
14. RBI must hear you first
RBI must give the accused a chance to explain before any ban takes effect.
15. A ban is made public
RBI publicises any such ban once it is imposed.
Do it
1. Exit hedge within one month
A hedger must close the position within one month of losing the underlying exposure.
2. Trades reported within 30 minutes
Market-makers must report every OTC credit derivative trade within 30 minutes of doing it.
3. Exchanges need RBI's approval first
An exchange needs RBI's approval before it can launch any credit derivative contract design.
4. Valuation method must be documented
Every market-maker must have a written, consistent way to value its book.
5. Follow your own regulator's rules
Each firm follows the capital rules its own regulator has already set.
6. RBI can demand records anytime
RBI may call for any information or explanation from anyone dealing in this market.
Background
1. What a CDS is
A CDS is a contract where one side pays the other if a borrower defaults.
2. Hedging must offset real risk
Hedging means using a credit derivative to cut the risk on a debt instrument already held.
3. What a TRS is
In a TRS, one side passes on a bond's whole return for a fixed or floating payment.
4. Industry panel rules on defaults
An industry committee decides facts, like whether a default really happened.
5. Accounting follows existing standards
If no accounting rule covers a deal, follow the accountants' institute's guidance.
6. RBI may publish market data
RBI may release market data with names removed, for the public good.
7. CCIL publishes daily outstanding value
CCIL must publish the total value of outstanding credit derivative contracts every day.
8. Old contracts run to expiry
Contracts already running under the old rules continue until they expire.