Banks in India can offer foreign currency-settled rupee derivatives

Move is expected to remove segmentation between onshore and offshore markets

The Reserve Bank of India has allowed banks in India to offer the offshore Foreign Currency Settled Overnight Indexed Swap (FCS-OIS), helping to improve price discovery and deepen the interest rate derivatives market. This move is also expected to remove the segmentation between onshore and offshore markets.

The permission follows the beneficial outcome of allowing banks in June 2019 to offer Rupee interest rate derivatives to non-residents to hedge their interest rate risk. This initiative added to liquidity in the domestic OIS market, promoted diversity in participation and reduced the segmentation between the onshore and offshore markets, RBI said in