As indicated in paragraph 137 of the Mid-term Review of Annual Policy for year 2006-07, an Internal Group was constituted by the Reserve Bank to review the existing guidelines on derivatives and formulate comprehensive guidelines on derivatives by banks.

2. Draft comprehensive guidelines on derivatives based on the recommendations of the Group were placed on the RBI website on December 11, 2006 and were open for comments from all concerned.

3. Comments were received from a wide spectrum of banks and other market participants. The guidelines have been suitably revised in the light of the feedback received and are furnished in the Annex.

4. Guidelines in respect of foreign exchange derivatives will be issued separately.

Yours faithfully,

Prashant Saran
Chief General Manager-in-Charge