The Reserve Bank of India will shortly issue guidelines to clear up ambiguities in local derivative regulations. In the last two weeks the banking regulator has been meeting with industry officials to discuss the proposals, which will be issued in draft form on the RBI's Web site at month end. Banks will then have one month to come back with suggestions before the guidelines take effect.
The RBI is trying to form a risk management framework, affecting all types of houses: local, foreign and nationalized, a senior salesman at a large foreign house told Derivatives Week. He griped that interpreting Indian rules has been a matter of "qualitative estimation."
The regulator has been very clear it does not want to talk about expanding the permissible range of products yet, noted the salesman. In this respect, the RBI will only talk about what is not allowed, such as derivatives financing. The regulator is "helping the market grow in an orderly manner," the salesman noted. Officials at the RBI itself could not be reached for comment.
The RBI is also impressing on the Institute of Chartered Accountants of India to make amendments to accountancy regulations concurrently with its own. The ICAI is clarifying rules which when in place are also expected to make regulators more open to giving the green light to additional products (DW, 6/20). International houses have been lobbying Indian regulators for derivatives such as caps, floors and swaptions for the last several years (DW, 11/17/03).
