Indian banks struggling to make gains from close-out netting law

Lawyers say undocumented derivatives trades hinder the audit trail needed to secure capital benefits

Banks in India are failing to set up the correct procedures to benefit from close-out netting of derivatives, say lawyers.

A law passed in 2020 gave banks a legal framework to enforce close-out netting in bilateral over-the-counter derivatives contracts in the event of default. However, many banks have been slow to identify their exposures and put in place proper documentation for their OTC derivatives transactions.

“That is a struggle for many of them, given the large volumes of exposures