Brief Overview:

The revised Credit Derivatives Directions expand India’s credit derivatives market beyond credit default swaps (CDS) to include products such as total return swaps (TRS), credit index derivatives, and credit derivatives futures. They also strengthen the regulatory framework through clearer eligibility norms, stronger risk management safeguards, and enhanced market infrastructure.

Technical Details:

Key Changes

1) Product scope: Expands the permitted product set beyond single-name CDS to include TRS, credit index derivatives and credit derivatives futures, supporting synthetic bond exposure and portfolio-level credit risk management.

2) Participant eligibility: Broadens the eligible user base through objective net worth or turnover thresholds, aligns NBFC market-maker eligibility with the scale-based regulatory framework, and introduces calibrated conditions for FPI participation.

3) Risk safeguards: Retains a controlled access framework by excluding individuals, restricting certain eligible users to hedging activity, and preserving safeguards for less sophisticated participants.

4) Market infrastructure: Expands underlying’s from bonds to indices, permits flexible settlement structures, supports exchange-traded products and enhances transparency through daily CCIL dissemination.

Takeaways:

Overall, the revised directions mark a calibrated move towards a deeper and more diversified credit derivatives market, with RBI balancing product innovation and market access against enhanced safeguards, transparency and risk oversight.

For further details, please see:

Reserve Bank of India (Credit Derivatives) Directions, 2026

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