India decides to launch interest rate futures

[B. Karthick]

MUMBAI: India on Wednesday decided to introduce exchange-traded
interest rate derivatives to help corporates, banks and households
guard against interest rates volatility, a move that came nine months
after launching of exchange- traded currency futures.

The derivatives would be based on the 10-year government bond yields,
according to market regulator Securities and Exchange Board of India
(SEBI) and banking watchdog Reserve Bank of India (RBI).

"Eligible exchanges desirous of offering interest rate futures may
apply to SEBI after fulfilling the conditions," SEBI said in a
release.

The conditions are given in a report by an RBI-SEBI joint panel and
are approved by both the regulators.

The report said those having a networth of Rs one crore would become
trading members and those with Rs 10 crore networth would be clearing
members in interest rate futures.

The contract would be settled by physical delivery, the panel said.
The move will also help to develop the debt markets.

Commenting on the development, Jagganadham Thunuguntala, equity head
of SMC Capitals, said, "It is an encouraging and welcome move. In
India, debt market is non existent. This is a move in right direction
by SEBI to develop the debt market."