The Reserve Bank of India said on Thursday it would allow banks, primary dealers and national financial institutions to hedge interest rate risks on the country's exchanges.

The central bank said in a statement it would initially allow participants to hedge exposures in bonds and treasury bills by executing deals in the Futures and Options segment of the Bombay Stock Exchange and the National Stock Exchange.

It said it would later consider granting access to more products based on the experience gained in the initial phase.

"Even primary dealers will be allowed only to hedge for the time-being. Market-making and trading will be gradually phased in," a spokeswoman for the central bank told Reuters.

The central bank said market participants could access details about how the new guidelines would be implemented on its Web site, www.rbi.org.in.