RBI drafts new rules on novation of OTC derivatives
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Asked by UPSCMains 2024 (GS3)1 PYQ
UPSC has already asked about this. Read the story with these questions in mind.
What happened
- RBI released the draft Reserve Bank of India (Novation of OTC Derivative Contracts) Directions, 2025 under Section 45W of the RBI Act, 1934, with comments due by 1 August 2025 [RBI].
Background
- Novation is now governed by an RBI circular of 9 December 2013; the review reflects changes in OTC derivatives regulation since then and market feedback [RBI].
Why it matters
- Novation means replacing one party to a contract with another. Clear rules matter as OTC derivative markets grow and more contracts change hands.
How to use this in Mains
- As per RBI (2025-07-09): RBI released the draft Reserve Bank of India (Novation of OTC Derivative Contracts) Directions, 2025 under Section 45W of the RBI Act, 1934, with comments due by 1 August 2025.
- Novation means replacing one party to a contract with another. Clear rules matter as OTC derivative markets grow and more contracts change hands.
Quotable data pointRBI released the draft Reserve Bank of India (Novation of OTC Derivative Contracts) Directions, 2025 under Section 45W of the RBI Act, 1934, with comments due by 1 August 2025.
RBI: Draft Novation of OTC Derivative Contracts Directions, 9 Jul 2025
Exam angle
UPSC
Prelims: Section 45W, novation.
Practice MCQs
Original practice questions (not PYQs).
Practice · UPSC
RBI's powers to regulate interest rate and derivative markets used here come from
Answer (b) & explanation
RBI release.
Go deeper
Official source: RBI: Draft Novation of OTC Derivative Contracts Directions, 9 Jul 2025
facts from cited sources only; faculty review pending