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Sunday, January 9, 2011
Not keen on banks guaranteeing corporate bonds, says Gopinath
Reserve Bank of India (RBI) Deputy Governor Shyamala Gopinath today said the central bank was not keen on allowing banks to guarantee corporate bonds. “RBI has been of the view that while this may increase the attractiveness of the bonds in the short run, the underlying objective of de-risking banks’ balance sheets and the true price discovery for credit risk in the market can never be developed,” she said on the sidelines of the Fixed Income Money Market Derivatives Association of India-Primary Dealers Association conference here. She also said if India could have a term-CD market, it could be a surrogate for a term money market. An RBI and Securities and Exchange Board of India (Sebi) team was studying how other markets were handling interest rate futures, she said. “Other than the US and the UK, which have physical delivery, most emerging markets have not been able to mandate physical delivery,” said Gopinath. She said that 90 per cent of such trades were cash-settled, so we know that if it is cash-settled, then there is no perfect connect. “The issue for us is should we leave the market in such a limbo or should we try cash-settled to improve liquidity in the bond markets. If we try cash settled, then clearly there are two-three issues. One of the main issues was a realistic reference price for doing settlement,” Gopinath said. She said RBI was keen on developing the two-year and five-year market as banks were more interested in investing in these tenures than in the 10-year one. “The 10-year is okay but probably shorter term IRFs will move faster than the longer terms,” Gopinath said.
Awaiting Report In Citi Fraud Case To Decide Action – Shyamala Gopinath
India's central bank will await the report of its team looking into the alleged 3-billion-rupee ($70 million) fraud involving an employee of Citigroup Inc.'s Indian wealth management operations before deciding the course of action, central bank Deputy Governor Shyamala Gopinath said on Saturday. "Any such thing makes the regulator think whether we need to reiterate certain things or we ensure that systems are in place. Because this is a reputation risk and fiduciary risk," Shyamala Gopinath told reporters on the sidelines of an annual fixed income conference.
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