Are India’s Derivatives Norms sufficient and battle ready?

Bank of America Plaza
Image by Frank Kehren via Flickr

While india’s central bank has been rolling out reforms at a slow pace even without significant market acceptance as desired, from Fixed ?income Derivatives to the current CDS approvals, it has also been concurrently cajoling foreign banks to stop overextending non funded lines and off balance sheet exposure among other actions that are a sure sign of a shallow market on ransom for each Golden Dollar that continues to hold us enthralled because of the asymmetrical flows.

The last in this series of a dissatisfied regulator was a series of penalties imposed on SBI, ICICI Bank and others  for not having any norms for their derivatives desks in place. Shortcomings include a non-existent risk management system, and inability / no desire to conduct due diligence on suitability of these products. 19 banks were penalised and have been served show cause notice.

Thus on top of already scarce demand and skin thin trading in derivatives, we have also had our top line banks being accused of not understanding their products and we do not even see any speculative profits or

English: Kundapur Vaman Kamath (born December ...
Image via Wikipedia

even losses from the alleged transactions as no disclosures were required for the products, probably engaged on an OTC basis and contract documentation never completed in tradition of the big desks at London and New York 10 years ago.

Really, we need to invest in the human resources and the infrastructure to make these thriving businesses for banks before we go looking for retail participation and this depth will not come from one off trades like India’s Olympics medal haul by the Kamaths and the Kochchars.

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