rupee interest rate derivatives presently permissible are forward rate agreements ( fra ), interest rate swaps ( irs ) and interest rate futures ( irf ). the permitted benchmarks for fra / irs are any domestic money or debt market rupee interest rate ; or, rupee interest rate implied in the forward foreign exchange rates, as permitted in respect of mifor swaps. while both banks and pds are allowed as market makers in the swap market, all business entities ( including banks and pds ) are permitted to hedge their underlying exposures using these instruments. pds have been also permitted to hold trading position in irf, subject to internal guidelines in this regard. the interest rate swap market has grown rapidly with participation from banks and corporates. the market is liquid and bidoffer spreads are narrow. transparency and reporting in order to have a mechanism for transparent capture and dissemination of trade information, the clearing corporation of india, at the instance of rbi, has recently developed a reporting system for otc interest rate swaps. the reported deals are processed by ccil which also offers certain post trade processing services like resetting interest rates, providing settlement values etc. to the reporting members. information in regard to traded rates and volumes are made available through ccil's website. once things stabilize, the next phase could be development of post - trade processing infrastructure to address some of the attendant risks. interest rate futures while fra / irs markets have shown phenomenal growth, the interest rate futures, first introduced on nse in 2003, have not picked up on account of certain structural factors. a sub - group of the rbi technical advisory committee on markets having representatives from the industry and academia, has been constituted to examine the issues, including the following : ( i ) review the experience with the interest rate futures so far, with particular reference to product design issues and make recommendations for activating the interest rate futures. ( ii ) examine whether regulatory guidelines for banks for interest rate futures need to be aligned with those for their participation in interest rate swaps. ( iii ) examine the scope and extent of the participation of non - residents, including foreign institutional investors ( fiis ), in interest rate futures, consistent with the policy applicable to the underlying cash bond market. the draft report of the group would be placed in the public domain for comments. iii. structured credit and credit derivatives the structured credit market internationally has grown phenomenally into a distinct asset class, encompassing a slew of complex products which

allowed access to the forwards market to the extent of their exposure in the cash market. fiis are permitted to hedge currency risk on the market value of entire investment in equity and / or debt in india as on a particular date using forwards. for fdi investors, forwards are permitted to ( i ) hedge exchange rate risk on the market value of investments made in india since january 1, 1993 ( ii ) hedge exchange rate risk on dividend receivable on the investments in indian companies and ( iii ) hedge exchange rate risk on proposed investment in india. nris can hedge balances / amounts in nre accounts using forwards and fcnr ( b ) accounts using rupee forwards as well as cross currency forwards. currency futures in the context of growing integration of the indian economy with the rest of the world, as also the continued development of financial markets, there is a need to allow other hedging instruments to manage exchange risk like currency futures. the committee on fuller capital account convertibility had recommended that currency futures may be introduced subject to risks being contained through proper trading mechanism, structure of contracts and regulatory environment. accordingly, reserve bank of india in the annual policy statement for the year 2007 - 08 proposed to set up a working group on currency futures to study the international experience and suggest a suitable framework to operationalise the proposal, in line with the current legal and regulatory framework. the group has had extensive consultations with a cross section of market participants including bankers associations, banks, brokers, exchanges, both indian and international, and is in the process of finalizing its report. given that india is not yet fully convertible on capital account, various options are available to deal with the issue of reconciling the regulatory framework in the cash and otc forward market with the currency futures segment. the international experience in this regard is mostly from oecd countries except for one single exception of south africa which has very recently introduced domestic currency futures. the draft report of the group will be placed in public domain for wider dissemination and feedback. ii. rupee interest rate derivatives rupee derivatives in india were introduced in july 1999 when rbi permitted banks / fis / pds to undertake interest rate swaps and forward rate agreements. these institutions were allowed to offer these products to corporates for hedging interest rate risk as well as deal in these instruments for their own balance sheet hedging and trading purposes. since then, many initiatives have been undertaken to deepen and broaden the market. the