In pursuance of the announcement made in the Union Budget for FY 2026-27, to enable the introduction of derivatives on credit indices and total return swaps on corporate bonds, the Reserve Bank of India had issued Draft Directions on February 6, 2026, seeking feedback from market participants, stakeholders and other interested parties. The feedback received on the draft directions has been examined and consequent modifications have been suitably incorporated in the final Master Directions.

The Reserve Bank of India (RBI) on Thursday noted that under the Reserve Bank of India (Credit Derivatives) Directions, 2026, resident non-retail users will be permitted to buy and sell credit protection through both Credit Default Swaps (CDS) and TRS. The revised framework removes restrictions linking participation to underlying credit exposures, allowing eligible entities greater flexibility in managing credit risk.

The RBI said the revised directions seek to broaden the credit derivatives market, facilitate efficient transfer and management of credit risk, and support the development of the corporate bond market. The directions allow eligible market-makers to offer CDS and TRS contracts in the over-the-counter market. The central bank has also noted that Resident non-retail users, including regulated financial entities and other eligible institutions, may use credit derivatives for hedging as well as other permitted purposes, subject to the provisions of the directions.

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