- Aim: helping long term investors in managing cash flows and interest rate risks.
- Implementation Date: May 2, 2025.
- Scope: Covers all over the counter (OTC) market transactions in India.
What Are Bond Forwards?
- Definition: A rupee interest rate derivative contract in which a buyer undertakes to buy a specific government security (G sec) from the seller at a pre-agreed future date.
- Function: To hedge interest rate movements by market players.
RBI’s Larger Initiative
- Improving Interest Rate Derivative Market
- More derivative products for risk management, facilitating greater liquidity and price discovery in the bond market.
- Who Will Benefit?
- Banks & Financial Institutions
- Pension & Insurance Funds
- Institutional Investors
In this move, the RBI strengthens its case in furthering its progress in making the financial market stronger and more diversified for the good management of interest rate risk.
