Reuters Reserve Bank of India said bond-forward trades should use Level 3 inputs for valuation.
Synopsis India's central bank has informed some lenders about the need to adjust bond forward accounting practices.
This change could impact billions of dollars in assets across the banking sector.
The Reserve Bank of India suggested using Level 3 inputs for valuing bond-forward trades during recent audits.
Banks have been in discussions with industry associations and clearinghouses for potential solutions and better pricing information.
By Bloomberg Nov 10, 2026, 07:32:00 AM IST Follow us India’s central bank told some lenders they should change the way they account for bond forwards contracts, assets that amount to billions of dollars across the industry, according to people familiar with the matter.ADVERTISEMENT During in-person regular audits in recent weeks, the Reserve Bank of India said bond-forward trades should use Level 3 inputs for valuation, the people said, asking not to be identified because the discussions were private.Level 3 is used when a trade’s value cannot be easily checked against observable information in the market, and relies on a bank’s own assumptions.
The classification can force banks to limit dividend payments and leave them with less regulatory capital, under RBI rules.
The notional value of such trades totaled 1.1 trillion rupees ($11 billion) this year, according to clearinghouse data.Banks have discussed the issue with the Fixed Income Money Market and Derivatives Association of India in recent calls and are seeking a resolution, they said.ADVERTISEMENT
