RBI’s New Rulebook: UTI Required for All OTC Derivative Deals by 2027

The Reserve Bank of India (RBI) has announced a major regulatory update for financial markets. From January 1, 2027, a Unique Transaction Identifier (UTI) will be mandatory for all over-the-counter (OTC) derivatives trades. The rule applies to direct private transactions in rupee interest rate derivatives and foreign currency derivatives. The RBI said this step will improve trade reporting, market transparency, and regulatory oversight by enabling policymakers to track derivative transactions more efficiently.

Unique Transaction Identifier (UTI): What It Means

A Unique Transaction Identifier (UTI) is a globally recognized tracking code assigned to each OTC derivatives trade.

Purpose of UTI,

• Uniquely identifies every transaction
• Prevents duplication in trade reporting
• Enhances regulatory transparency
• Improves risk assessment

The RBI described UTI as a critical global data element designed to provide authorities with a comprehensive view of the OTC derivatives market.

RBI Mandate Unique Transaction Identifier: Key Highlights

The RBI circular outlines clear implementation details.

Important condition: Only transactions entered into on or after January 1, 2027 must comply.

Which OTC Derivatives Trades Are Covered?

The UTI mandate covers multiple derivative segments,

• Rupee interest rate derivatives
• Foreign currency derivatives
• Foreign currency interest rate derivatives
• Credit derivatives
• Forward contracts in government securities

These trades are already reported to the CCIL Trade Repository (CCIL-TR).

Role of CCIL Trade Repository (CCIL-TR)

Currently, OTC derivatives trades are reported to,

• Clearing Corporation of India Limited – Trade Repository (CCIL-TR)

Functions

• Collects OTC trade data
• Maintains transaction records
• Supports regulatory monitoring

With mandatory Unique Transaction Identifier (UTI) tagging, trade tracking will become more structured and error-resistant.

UTI Structure: Technical Details

The RBI also specified the UTI format,

Maximum length: 52 characters

Composition

• Legal Entity Identifier (LEI) of generating entity
• Followed by a unique transaction code
• This structure ensures global compatibility and uniqueness.

Why RBI Introduced UTI Mandate

The decision aligns India with global OTC derivatives reporting reforms.

Expected benefits,

• Better market surveillance
• Reduced reporting discrepancies
• Improved systemic risk monitoring
• Enhanced data quality

UTI helps regulators understand interconnected exposures in the OTC derivatives market.

Background: OTC Derivatives & Regulation

• Over-the-counter (OTC) derivatives are privately negotiated contracts traded outside formal exchanges.
• These include interest rate swaps, currency derivatives and credit derivatives.
• While OTC markets offer flexibility, they also pose transparency and counterparty risk challenges.
• After the global financial crisis, regulators worldwide pushed for stronger trade reporting and standardised identifiers like the Unique Transaction Identifier (UTI).
• The RBI’s latest mandate reinforces India’s commitment to safer, more transparent derivative markets.

Question

Q. RBI has mandated UTI for OTC derivatives trades effective from:

A) January 1, 2026
B) July 1, 2026
C) January 1, 2027
D) April 1, 2027