The Hindu Business Line : Derivatives: RBI asks players to use rupee benchmarks

THE Reserve Bank of India has asked banks, financial institutions and primary dealers to use rupee benchmarks for interest rate derivatives but has offered a transition period of six months for using MIFOR as a benchmark.

RBI had allowed these market participants to use forward rate agreements and interest rate swaps in 1999 to allow them to manage and control risks arising from deregulation of interest rates.

However, RBI had allowed some of these market participants to use LIBOR as a benchmark as rupee benchmarks were still to develop and find wide acceptance.

"Over the years, the depth and liquidity in the money markets have increased following the limits placed on call money, development of inter-bank term deposits, market repos, CBLOs, CPs, CDs and increased issuance and activity in treasury bills," RBI said.

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