What are Indian insurance companies requesting from banks?

Indian insurance companies are requesting that banks accept government bonds as collateral instead of requiring cash collateral for bond-derivative trades.

How has recent bond market volatility in India affected insurers?

The recent spike in India's 10-year bond yield, which rose by 35 basis points in August 2025, has hurt bond valuations and forced insurers to set aside more cash, straining their liquidity.

What is the potential hurdle for banks in accepting bonds as collateral?

A potential hurdle for banks is how to value the bonds pledged as collateral, particularly when bond prices are falling.

Home / Business and Economy / Indian Insurers Seek Collateral Easing Amid Bond Volatility

Indian Insurers Seek Collateral Easing Amid Bond Volatility

17 Nov, 2025

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Summary

Indian insurers ask banks to accept government bonds as collateral
Recent bond market volatility forced insurers to set aside more cash
Discussions ongoing between insurers and banks on collateral rules

Indian Insurers Seek Collateral Easing Amid Bond Volatility

As of November 17, 2025, Indian insurance companies are seeking to renegotiate collateral rules with banks for their bond-derivative trades. This comes after recent bouts of volatility in the bond market, which forced some market participants to set aside more cash, straining their liquidity.

At least three private sector insurers have approached their bank counterparties, requesting them to accept government bonds - assets they already hold in large amounts - instead of requiring cash collateral. Currently, insurers must post cash as margin for these deals, with the rules set by individual banks rather than regulators.