The Reserve Bank of India (RBI) on Monday released the report of the working group on introduction of interest rate options in India.
The group recommended permitting simple call and put options, caps, floors, collars and swaptions in the beginning while looking to introduce complex structures gradually. Both over-the-counter (OTC) as well as exchange traded options may be introduced, the group stated.
“While banks, PDs and other regulated entities having sound financials and prudent risk management may be allowed as market makers subject to the approval of concerned regulator, all domestic entities having underlying interest rate risk may be permitted as users,” the report indicated.
It further added that while no documentation relating to underlying exposure may be required for exposures upto Rs five crore, large corporates may also be allowed to take hedging positions for their anticipated interest rate exposures.