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Draft on Interest Rate Derivatives (IRDs)
Why is it in news?
- The Reserve Bank proposed allowing foreign portfolio investors (FPIs) to undertake exchange-traded rupee interest rate derivatives transactions.
- The transaction would be subject to an overall ceiling of Rs. 5,000 crore.
Interest Rate Derivatives (IRDs):
- IRDs are contracts whose value is derived from one or more interest rates, prices of interest rate instruments, or interest rate indices.
Aim:
- To encourage higher non-resident participation.
- Enhance the role of domestic market makers in the offshore market.
- Improve transparency and achieve better regulatory oversight.