The Reserve Bank of India has released its RBI Credit Derivatives Directions 2026, effective June 25, 2026. These new rules govern Credit Default Swaps (CDS), Total Return Swaps (TRS), and futures on credit indices. They apply to both OTC markets and recognised stock exchanges in India.
Key Details of the RBI Credit Derivatives Directions 2026
Scheduled Commercial Banks, Standalone Primary Dealers, and certain NBFCs can act as market-makers. Small Finance Banks, Payment Banks, and Regional Rural Banks are excluded from this role. Additionally, institutions like NABARD, NHB, and EXIM Bank qualify as eligible market-makers.
Users are classified as either retail or non-retail. Non-retail users include NBFCs, insurance companies, mutual funds, pension funds, AIFs, and FPIs. Retail users, however, may only enter CDS or TRS contracts for hedging purposes. No market-maker may offer credit derivative contracts to individual investors.
Foreign Portfolio Investors can act as both protection buyers and sellers. However, the total notional amount of CDS protection sold by all FPIs cannot exceed 5% of outstanding corporate bonds. CCIL will monitor and publish this limit utilisation daily.
For TRS contracts, non-resident investors may participate either for hedging or through a fully funded structure. In such structures, the overseas investor provides the full notional amount to the Indian market-maker. Therefore, the RBI maintains clear controls over capital flows linked to these instruments.
What This Means for the Indian Credit Market
These directions significantly expand India’s credit derivatives landscape. For example, futures on credit indices are now formally permitted on stock exchanges. This opens new hedging and investment avenues for institutional participants.
FIMMDA will set up a Credit Derivatives Determinations Committee. This committee will resolve key questions around credit events, succession events, and auction settlement procedures. Its decisions will be binding on all market participants.
Meanwhile, all OTC credit derivative transactions must be reported to CCIL’s trade repository within 30 minutes. Market-makers must also follow robust mark-to-market valuation methodologies. Violations of these directions may result in a temporary ban from the credit derivatives market.
As a result, the RBI Credit Derivatives Directions 2026 bring greater structure, transparency, and investor protection to India’s evolving fixed income derivatives market. These rules supersede the earlier 2022 directions on credit derivatives.
Source: RBI Notifications
