Market turbulence is reshaping how financial institutions handle risk management in India. Insurance companies are now pushing major banks to relax collateral requirements on bond-derivative positions—a move driven by recent volatility spikes that drained their cash reserves.

The problem? When markets swing wildly, participants face margin calls that force them to lock up more capital as safety buffers. For insurers managing large portfolios, this sudden liquidity squeeze creates operational headaches. They're essentially asking: why should stable institutions face the same stringent collateral demands as high-risk traders?

This isn't just an Indian phenomenon. Global markets have seen similar tensions where derivative hedging—meant to reduce risk—ironically creates liquidity crunches during stress periods. The debate touches a nerve: balancing systemic safety with market efficiency.

Banks face a tough call. Easing rules could free up billions in trapped capital, but it might also amplify risks if another volatility wave hits. The outcome could set precedents for how emerging markets calibrate their derivatives frameworks going forward.