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Mumbai, Oct. 13 Banks can now take trading positions in interest rate futures (IRFs), said the Reserve Bank of India in a notification issued on Monday. These guidelines will also be applicable to overseas branches of Indian banks, the RBI said.

Earlier banks were allowed to transact in IRFs for the purpose of hedging the risk in their underlying investment portfolio.

According to an official of a leading public sector bank, earlier banks could only buy IRFs, now they can also sell. This may improve volumes in the IRFs market, he said. However, he added that given the requirements of margins in the future market, the impact may not be much.

“This is just one more instrument for banks for hedging,” he said.

More Stories on : Derivatives Markets | Interest Rates

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