The Reserve Bank on Thursday announced a slew of reforms in the fixed income and currency markets that would increase participation and boost liquidity in local debt market.
The Reserve Bank on Thursday announced a slew of reforms in the fixed income and currency markets that would increase participation and boost liquidity in local debt market.
In a major step, which will help ease the process of investment in debt securities, foreign portfolio investors (FPIs) would be allowed to transact in corporate bonds directly without a broker.
Reserve Bank will now permit entities exposed to exchange rate risk, whether resident or non-resident, to undertake hedge transactions with simplified procedures, upto a limit of $ 30 million at any given time.
The person can use his discretion to access any market (OTC or exchange) and use any of the permissible products.
With a view to develop the market for rupee denominated bonds overseas, banks would now be permitted to issue rupee denominated bonds overseas also called as “Masala bonds’. This is to provide an additional avenue for banks to raise additional Tier I and Tier II capital as these rupee denominated bonds would qualify for inclusion as additional tier – I and tier – 2 capital.
RBI also proposed to allow banks to issue rupee denominated bonds overseas under the extant framework of incentivising issuance of long term bonds by banks for financing infrastructure.
