Banks not allowed to trade in bonds for infra lending: RBI

Tags: Banking
Banks will not be allowed to trade bonds issued by other lenders for infrastructure lending that would be exempted from mandatory reserve requirements under the guidelines issued last week, said Reserve Bank of India (RBI) Deputy Governor R Gandhi.

The RBI last week allowed lenders to issue bonds for infrastructure lending, but barred the banks from holding each other's bonds.

"Restriction on cross holding does apply to trading also," Gandhi told Reuters.

Gandhi said the central bank would prefer that these bonds for infrastructure lending attract investors from outside the banking sector.

"The idea is funds to come from outside the banking system," he said.

Dealers had been confused about whether the cross holding restriction also meant that the banks were not allowed to trade in these bonds, given that lenders are crucial market makers in this segment.

"Debt capital market traders in banks will help create liquidity in this market because they are market makers, otherwise liquidity in this segment will not pick up," said a senior dealer at a bank.

EDITORIAL OF THE DAY

  • Trashing the Aadhar project without logic or reason serves no purpose

    Aadhar number and cards enrollment is a sovereign exercise undertaken by the Centre over the last 10 years to essentially capture the socio-economic d

FC NEWSLETTER

Stay informed on our latest news!

TODAY'S COLUMNS

Sandeep Bamzai

Cut & Thrust: SRK’s ALPHABET SOUP

On Saturday, the Enforcement Directorate sent a show cause notice ...

Gautam Datt

The Congress quandary

A government without an opposition is an unfortunate scenario in ...

Zehra Naqvi

Success lies in learning to embrace failure

Among the thronging multitudes that offer you lessons on success, ...