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

Tags: RBI, 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.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • Neither secular nor socialist, India at 66 is back where it began

    The republic has entered its 66th year but the nation is more than just another year older.

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Arun Kumar Jain

Building great cities (and nations)

Fifteen to twenty years’ span is the time when humans ...

Kuruvilla Pandikattu SJ

Defining success differently

Researchers spent four decades studying a group of mathematically talented ...

Shona Adhikari

All roads lead to Delhi, as it gears up for art fair

With the seventh edition of India Art Fair (IAF) coming ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture