As per the RBI Act, the validity of any OTC derivative contract is contingent on at least one of the parties to the transaction being a regulated entity. We introduced the OTC derivative products in a phased manner consistent with the hedging needs of the real sector.
Even as the variety and complexity of OTC products in India are limited, the Reserve Bank has always been engaged in improving the transparency and reducing the counterparty risk in the OTC derivatives markets. As the products diversified, we focussed on the development of a robust market infrastructure for trading, settlement and reporting of transactions. There have been significant reforms in OTC derivatives.