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RBI revises norms on ready forward contracts in CDS

India Infoline News Service/ 17:54 , Jan 08, 2013

Repo in corporate debt will also be permitted on commercial papers, certificates of deposit and non convertible debentures of less than one year of original maturity

The Reserve Bank of India (RBI) has issued revised guidelines on ready forward contracts in corporate debt securities. As part of the measures to develop the corporate bond market, repo transactions were allowed in corporate debt securities.

Taking into consideration the market feedback and suggestions of the Technical Advisory Committee on Money, Foreign Exchange and Government Securities Markets, the central bank has revised the guidelines as under: Repo in corporate debt will be permitted on Commercial Papers, Certificates of Deposit and Non Convertible Debentures of less than one year of original maturity, the RBI circular said on Monday.

Haircut is the difference between prices at which a market maker can buy and sell a security. For AAA rated bonds, the revised minimum haircut is at 7.5% from 10%; 8.5% (12%) for AA+ rating and 10% (15%) for AA rating.


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