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RBI may issue fresh norms on derivatives

With the Reserve Bank having commenced its yearly inspection of the accounts of banks, bankers expect it to issue fresh guidelines on derivative products soon.

business Updated: May 18, 2008 18:08 IST

With the Reserve Bank having commenced its yearly inspection of the accounts of banks, bankers expect the banking regulator to issue fresh guidelines on derivative products soon.

"After examining the books of banks which have such transactions, the Reserve Bank might restructure the existing guidelines on derivative products. This would help participants (banks and corporates) get a better understanding of such products," Axis Bank's Head of Treasury Partha Mukherjee told PTI in Mumbai.

Another banker who did not want to be quoted said, "RBI needs to intensify its efforts in categorising derivative products and should encourage disclosures by corporates who opt for such products, as plain financial literacy may not help shareholders understand the product."

Derivatives are financial tools whose characteristics and value depend upon the value of an underlier, typically a commodity, bond, equity or currency.

Indicating that it might issue fresh guidelines on the matter, RBI Deputy Governor V Leeladhar had recently said the apex Bank would start its yearly-inspection of banks in May and would assess the outcome prior to reaching any conclusion on the matter.

"We will start inspections in May...Any decision will be taken after that," Leeladhar said.