Banks’ characteristics matter Thus, the ultimate impact of negative rates on bank profits and credit supply is difficult to estimate. Not all banks would be affected to the same extent by the negative rates. The impact of negative rates on banks’ profits will depend on the composition of their balance sheets and, more generally, on their business model.
Before I deal with the Indian derivative markets, let me discuss some salient issues about the derivatives market in general. The market for financial derivatives, as indeed the market for any financial assets, is populated by three generic classes of participants: the hedgers, the arbitrageurs and the speculators. The hedgers are the final consumers, as it were.