RBI asks some banks to value bond forwards with Level 3 inputs, Bloomberg reports
The RBI has reportedly told some lenders to value bond forwards using Level 3 inputs, a label that can limit dividends and cut regulatory capital.
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RBI bond forwards are under fresh scrutiny after the Reserve Bank of India reportedly asked some lenders to change how they value the contracts, according to a Bloomberg report published on 9 November 2026. Business Standard carried the report, which cites people familiar with the matter and says the central bank wants Level 3 inputs used for the trades.
What the RBI bond forwards instruction covers
Bond forwards are contracts that banks widely sell to insurers, who use them to lock in future bond prices and protect themselves against interest rate swings. Level 3 is the valuation tier used when a trade’s value cannot be easily checked against observable market information, so it relies on a bank’s own assumptions. The report says the RBI conveyed its view during in-person regular audits in recent weeks.
The reports do not name the lenders involved. Lapaas Voice, which summarised the Bloomberg report, said it found no separate public RBI circular on this instruction.
Key numbers
- Level 3: the valuation tier the RBI reportedly wants banks to use for bond forwards.
- ₹1.1 lakh crore: the notional value of such trades this year, roughly $11 billion, according to Lapaas Voice’s account of the clearinghouse data in the Bloomberg report. Notional value is not the same as money at risk.
- 2 industry bodies: FIMMDA and the Clearing Corporation of India (CCIL) are both part of the talks.
- 0 lenders named in the reports.
FIMMDA and CCIL talks on bond forward contracts
Banks have discussed the issue with FIMMDA in recent calls and are seeking a resolution, Business Standard reported. Lenders have also held informal talks with CCIL about adding more pricing information to its trade repository. CCIL has begun trials of an electronic bond-forward trading platform that could improve price transparency, though its final design and launch date are not public.
The RBI, FIMMDA and CCIL did not immediately respond to requests for comment, the report said.
Why Level 3 valuation matters for bank capital
According to the Bloomberg report, a Level 3 label can force banks to limit dividend payments and leave them with less regulatory capital under RBI rules. The assets amount to “billions across the industry,” the report said. Lapaas Voice noted that Level 3 does not automatically mean an asset is bad, and that the dividend limits would not necessarily apply to every bank.
What happens next
The next step is whether the RBI issues a formal instruction or the industry bodies agree a way to make bond-forward prices easier to verify. Read more on the Reserve Bank of India, see how another central bank is handling policy at the Bank of England and follow our India coverage.
Bond forwards are sold widely to insurers, so a change in how banks value them can affect bank capital and dividends. The instruction was conveyed in audits and is not a public circular, and no bank has been named.