Is CCIL ready for money market derivatives and interest-rate swaps?
In the US, for instance, there are exchange-traded derivatives, besides OTC derivatives like forward rate agreements (FRAs) and interest rate swaps. In India, FRAs have already started and is becoming popular. But volumes will pick up only when major players are able to benefit from a term-money market. The exchange-traded futures in G-Secs can also be developed in India. But the present conditions are not highly favourable. One of the important missing links is the ban on short-sales. As of today, the RBI does not favour giving full freedom to all entities, like banks, primary dealers, etc, that fall under its regulatory domain, to involve in short-sales. Hence, the time for developing exchange-traded interest rate futures has not yet arrived. To a large extent, the collateralised borrowing and lending obligation (CBLO), which will be shortly introduced by CCIL will play an important role in development of the term-money market. The RBI has permitted CBLOs of maturity up to one year.
