After retail trading in government papers, the next major step in debt market reforms would be to allow interest rate derivatives to be traded on bourses.

A Reserve Bank of India committee, working closely with the Securities and Exchange board of India on introducing interest derivatives trading, is likely to submit its report by this month end, RBI Deputy Governor Rakesh Mohan told reporters after the launching of G-secs retail trading by Finance Minister Jaswant Singh.

"The committee, headed by Standard Chartered Bank CEO Jaspal Bindra, is expected to submit the report by the end of this month," he said, adding that Sebi is also represented in the committee.

Interest rate derivatives like swaps and forward rate agreements are now used by banks to hedge interest rate risks.

At present, it is not available to retail investors as a separate instrument.

Finance secretary S Narayan said this step was being taken to check long term volatility in interest rate, which will be contained by the interest rate derivatives.

"This will probably be in place very soon," he said.

The need for the derivatives trading was highlighted in the Reserve Bank of India in its policy announcements earlier but it could not be introduced as bourses were not ready with the requisite infrastructure.