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Nod to repo in corporate debt of less-than-a-year maturity

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BS Reporter Mumbai
Last Updated : Jan 29 2013 | 2:34 PM IST

The Reserve Bank of India (RBI) has permitted repo (repurchase agreements) in corporate debt on commercial papers (CPs), certificates of deposit (CDs) and non-convertible debentures (NCDs) of less than a year of original maturity, according to a notification on Monday.

RBI has also decided to allow credit default swaps (CDS) on unlisted but rated corporate bonds even for issues other than infrastructure companies. “CDS shall be permitted on securities with original maturity up to one year like CPs, CDs and NCDs with original maturity less than one year as reference/deliverable obligations,” the notification said.

The banking regulator also said the users should be allowed to unwind their CDS bought position with original protection seller at mutually agreeable or Fixed Income Money Market and Derivatives Association of India (FIMMDA) price. “If no agreement is reached, then unwinding has to be done with the original protection seller at FIMMDA price,” RBI said.

The minimum haircut applicable on the market value of the corporate debt securities prevailing on the date of trade of the first leg has also been revised. For ‘AAA’, which signifies the highest security, it has been revised from 10 per cent to 7.5 per cent. In the case of ‘AA+’, the revision is from 12 per cent to 8.5 per cent and for ‘AA’, it is from 15 per cent to 10 per cent.

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First Published: Jan 08 2013 | 12:27 AM IST

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