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RBI to review guidelines on credit default swaps

Date: 05-12-2020
Subject: RBI to review guidelines on credit default swaps
The Reserve Bank of India (RBI) on Friday said it will review the guidelines on credit default swaps to facilitate the development of the credit derivatives market.

The central bank will soon issue draft directions for public comments in this regard.

"With the recent enactment of the legislation for Bilateral Netting of financial contracts providing a fillip to the underdeveloped credit derivatives market in India, it has been decided to review the extant guidelines on Credit Default Swaps (CDS) and issue draft directions for public comments shortly," RBI Governor Shaktikanta Das said while announcing the monetary policy.

The revised directions are expected to facilitate the development of credit derivatives market and a liquid and vibrant market for corporate bonds, especially for low-rated issuers, he said.

The CDS guidelines were last issued in January 2013.

The RBI said it has also reviewed the comprehensive guidelines on derivatives, issued in November 2011, and will issue the draft directions for public comments later on Friday.

"The revised guidelines seek to promote efficient access to derivative markets while ensuring high standards of governance and conduct in Over the Counter (OTC) derivative business by market makers," Das said.

RBI will also release comprehensive draft directions on call, notice and term money markets, Certificate of Deposits (CDs), Commercial Papers (CPs) and Non-Convertible Debentures (NCDs) with original maturity of less than one year for public feedback later on Friday.

"The revised directions seek to bring consistency across products in terms of issuers, investors and other participants," Das said.

He said these announcements may sound technical but they will go a long way in promoting and developing the corporate bond market and the derivatives market in India.

"Time will tell how effective they are but we are very optimistic that this will definitely give a fillip to the corporate bond market segment and also to the money markets," Das said.

The Monetary Policy Committee (MPC) on Friday left key interest rates unchanged but decided to maintain an accommodative stance.


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