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The Reserve Bank of India (RBI) clarified that banks are permitted to participate in Interest Rate Futures (IRFs) both for the purpose of hedging the risk in the underlying investment portfolio and also to take trading position.
But RBI added that banks are not allowed to undertake transactions in IRFs on behalf of clients.
Similarly, stand-alone primary dealers are allowed to deal in IRF for both hedging and trading on own account and not on client’s account, said RBI.
