RBI Update - Participation of Standalone Primary Dealers in Non-deliverable Rupee Derivative Markets

The Reserve Bank of India has permitted Standalone Primary Dealers (SPDs) authorised as Authorised Dealer Category-III (AD Cat-III) to participate in non-deliverable derivative contracts (NDDCs) involving the Rupee , a facility earlier available only to AD Cat-I banks operating an IFSC Banking Unit (IBU). This change enables SPDs to transact in NDDCs with both residents and non-residents, thereby widening market participation and deepening liquidity in the offshore rupee derivative market. The amendments made in the Master Direction – Risk Management and Inter-Bank Dealings are four specific insertions to bring Standalone Primary Dealers (SPDs) authorised as AD Cat-III within the scope of non-deliverable rupee derivative contracts (NDDCs). These are:

Paragraph Before Amendment After Amendment Part-A (Section-I), Para 2.2(vi) Transactions in NDDCs could be offered by AD Cat-I banks operating IBUs. Added: “Such transactions can also be offered to residents and non-residents by Standalone Primary Dealers authorised as Authorised Dealer Category-III.” Part-A (Section-I), Para 2.3(iii) Mentioned only “IFSC Banking Unit” in the eligible participants. Inserted after: “and Standalone Primary Dealers authorised as Authorised Dealer Category-III.” Part-C, Para 3A (first insertion) Referred only to regulatory framework (“as amended from time to time”). Added after: “and Standalone Primary Dealers authorised as Authorised Dealer Category-III.” Part-C, Para 3A (second insertion) Covered only entities “having IBUs”. Added after: “Standalone Primary Dealers authorised as Authorised Dealer Category-III.”

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