Mumbai: The Reserve Bank of India (RBI) here on Thursday announced measures for the development of fixed income and currency markets.
The measures are intended to further market development, enhance participation, facilitate greater market liquidity and improve communication, the central bank said in a statement.
“Accepting many of the recommendations of the Khan Committee to develop the corporate bond market, it has been decided to enhance the aggregate limit of partial credit enhancement (PCE) provided by banks,” the statement said.
The revised measures will also permit brokers in corporate bond repos, authorise the platform for repo in corporate bonds and encourage credit supply for large borrowers through market mechanism, it said.
It has also been decided to seek suitable legal amendments to enable the Reserve Bank to accept corporate bonds under Liquidity adjustment Facility (LAF).
To further encourage the overseas rupee bond market, banks are being permitted to issue rupee bonds overseas (Masala Bonds) for their capital requirements and for financing infrastructure and affordable housing.
“The measures underline the broad philosophy of measured and well signalled liberalisation of markets while minimising the risks associated with speculation, competition, and innovation,” the RBI said.
A market making scheme in government securities by primary dealers has been worked out in consultation with the government which may help in increasing the liquidity of semi-liquid securities.
Relaxation of tenor and counterparty restrictions in repo market in G-sec will also help in market liquidity, the bank said.
It has also been agreed with SEBI to provide FPIs (foreign portfolio investors) facility to trade directly in corporate bonds.
“In a fundamental shift in foreign exchange market regulations, greater leeway is being proposed for residents to maintain open positions. The permissible limits for hedging in the OTC (over the counter) as well as exchange traded markets are also being rationalised,” it said.
“It is also proposed to comprehensively review the framework for hedging of commodity price risk in the overseas markets by Indian companies,” it added.