RBI may allow repo trades via CP, CD

Last Updated: Wed, Dec 12, 2012 21:37 hrs

The Reserve Bank of India (RBI) may soon allow repo trades between market players through certificates of deposit (CDs) and commercial paper (CP). “Given that not much of transaction happen and also that there is a demand, we will allow repo in CDs and CP,” H R Khan, deputy governor of RBI, said on Wednesday.

Khan also said the government was expected to notify on reducing withholding tax on rupee-denominated infrastructure bonds soon. Besides, RBI was considering whether foreign investors can be allowed to participate in currency futures trading.

RBI is also in talks with market players and the government to develop the credit default swaps market, said Khan.

“Household savings are dipping including bank deposits and equities,” said Khan. He further expressed concerns about India's external sector vulnerability.

According to Khan, RBI has a gradual approach to capital account liberalisation and liberalising trade than capital account is more important for the central bank.

The deputy governor believes that after Basel 3 norms come into the force, banks will be constrained to expand their loan books. So there's a need for a thriving corporate debt market. The infrastructure sector has been reeling under lack of funds. Corporate bond market growth is necessary to fund this growth, he added.

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