The Reserve Bank of India (RBI) has formed a working group to find ways to revive trading of interest rate futures and to consider whether foreign investors should be allowed to trade the derivatives. The eight-member group will be chaired by RBI executive director V K Sharma and includes Kotak Mahindra Bank managing director Uday Kotak, National Stock Exchange (NSE) managing director Ravi Narain and State Bank of India (SBI) chief financial officer (CEO) M M Lateef.

The working group’s report would be submitted to the RBI within three months of its first meeting, for which no date has been announced. Last year, an RBI-appointed panel said India needed to develop an interest rate futures market to enable participants to execute trading calls and hedge underlying exposure better. The panel will also examine whether regulatory guidelines for banks for interest rate futures need to be aligned with those for their participation in interest rate swaps.

“It will also examine the scope and extent of the participation of non-residents, including foreign institutional investors (FIIs) in interest rate futures, consistent with the policy applicable to the underlying cash bond market,” the RBI said.