The Reserve Bank of India has announced a battery of measures aimed at bolstering participation in the fixed income and currency markets in India.
The central bank has accepted many of the recommendations of the Khan Committee to develop the corporate bond market, it said in a notification on Thursday. HR Khan, who retired in July this year, held the post of deputy governor of the RBI in charge of financial market regulation.
Among major measures for the corporate bond market, the RBI has decided to “enhance the aggregate limit of partial credit enhancement provided by banks, permit brokers in corporate bond repos, authorise the platform for repo in corporate bonds, and encourage credit supply for large borrowers through market mechanism.”
The RBI has also decided to accept corporate bonds under the liquidity adjustment facility.
One of the major decisions taken by the RBI is enhancing the partial credit enhancement provided by banks.
In order to increase the attractiveness of corporate bonds, banks were allowed to underwrite a portion of the corporate bond by providing partial credit enhancement.
This enhancement provided by banks would then improve the rating of the bonds issued. The RBI has announced that banks can now provide a partial credit enhancement of up to 50 percent of the bond issue size, compared to the previous cap of 20 percent.
Read the full BloombergQuint report here.