The Reserve Bank of India has finalized and brought into force its 2026 credit derivatives framework for over the counter and exchange traded markets in India. The new regime supersedes the 2022 directions and broadens the market by permitting over the counter credit default swaps and total return swaps, while also allowing exchanges to offer standardized single name CDS, CDS on credit indices and futures on credit indices with guaranteed settlement, subject to prior Reserve Bank approval and Securities and Exchange Board of India operational rules. The framework sets out who can make markets, who can use the products and on what terms. Eligible market-makers include scheduled commercial banks other than certain smaller bank categories, standalone primary dealers, specified non-bank financial companies and named development finance institutions. Retail users, excluding individuals, may use CDS and TRS only for hedging and must have the underlying exposure, while non-retail users may buy protection or enter TRS without purpose restrictions. Insurance companies, pension funds, mutual funds, alternative investment funds and Foreign Portfolio Investors may sell CDS protection, with FPI protection selling capped at 5 per cent of the outstanding stock of corporate bonds and subject to additional bond eligibility, maturity and investment limit conditions. Eligible reference obligations and assets include money market debt instruments, rated INR corporate bonds and debentures, and certain unrated infrastructure special purpose vehicle bonds, while structured products such as asset-backed securities, mortgage-backed securities, credit enhanced bonds and convertible bonds are excluded. OTC trades must be reported to the Clearing Corporation of India Ltd. within 30 minutes, and FIMMDA must establish a Credit Derivatives Determinations Committee whose decisions on credit events and related matters will bind market participants. The directions apply from June 25, 2026. Existing directions continue to govern legacy credit derivative contracts until those contracts expire.
Reserve Bank of India2026-06-25
Reserve Bank of India issues 2026 credit derivatives directions opening credit index products and corporate bond total return swaps
The Reserve Bank of India has issued its 2026 credit derivatives directions with immediate effect, replacing the 2022 framework and expanding the market to include credit index products and total return swaps on corporate bond exposures. The rules cover both OTC and exchange traded markets, set participant eligibility and hedging conditions, and permit FPI participation subject to a 5 per cent cap on aggregate CDS protection sold against outstanding corporate bonds. Legacy contracts remain under the previous regime until expiry.