The Reserve Bank of India on 10th February 2022 has allowed the bank in india having Authorised Dealer Category-I (AD Cat-I) license under FEMA, 1999, to offer Foreign Currency Settled Overnight Indexed Swaps (FCS-OIS) to improve price discovery and deepen the interest rate derivatives market.
Market-makers having Authorised Dealer Category-I (AD Cat-I) license under FEMA, 1999, may offer FCS-OIS contracts to non-residents, other than individuals. Such market-makers may also undertake transactions in FCS-OIS contracts among themselves. The market-makers can undertake these transactions through their branches in India, through their International Financial Services Centre (IFSC) Banking Units (IBUs) or through their foreign branches (in case of foreign banks operating in India, through any branch of the parent bank).
Non-residents may also undertake FCS-OIS transactions with the market-makers having AD Cat-I license for purposes other than hedging interest rate risk. These transactions may be undertaken directly with a market-maker in India, or by way of a ‘back-to-back’ arrangement through a foreign branch of the market-maker or through their IBUs.
These Directions shall be applicable to Rupee interest rate derivatives transactions undertaken on recognized stock exchanges and Over-the-Counter (OTC) markets, including on electronic trading platforms (ETPs).
