The Hindu Business Line : Trading in derivatives equals gilts volume: Fitch

This report draws on a survey undertaken in conjunction with the Indian Banks' Association (IBA) on India's interest rates and foreign exchange derivatives markets, written specifically for financial analysts, policy makers and other interested parties who may not currently be directly involved in the market.

"Fitch Ratings and IBA surveyed various commercial banks before compiling the report; Fitch also held one-on-one discussions with some of the key players in the market, and separately surveyed mutual funds and primary dealers. While many responses to the survey were received, the agency understands that regulations in India prohibit mutual funds and primary dealers from participating in all areas of the market, limiting their input. Insurance companies were excluded from the survey, as at the time of the survey, they were prohibited from entering into derivatives contracts," the Fitch press release said.

The agency has chosen to report its findings given the relative paucity of hard data in this relatively unknown but important segment of the market. Fitch will follow up with those institutions that have reported large exposures to better understand the degree of risk assumed. Response quality and timeliness depend on reasons including risk-reporting systems that are crucial to the healthy functioning of the derivatives portfolio, it said.

Commenting on the market, Mr Amit Tandon, Managing Director, Fitch Ratings India, said, Any disruption in the market could have far reaching ramifications. It is therefore important for policy makers to ensure that legal, accounting, valuation and risk-reporting policies are continuously monitored."