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Tuesday, October 16, 2012

Norms to buy back illiquid govt securities on the anvil: RBI

A joint working group of the Government and the Reserve Bank of India is working on guidelines to buy back illiquid government securities, according to H. R. Khan, Deputy Governor, RBI.

“Over a period of time some budget will have to be set aside to provide for the premium to retire those securities whose volumes are low.

“Guidelines on the same are being worked upon by a joint group of the Government and the RBI, Khan said on the sidelines of a banking summit organised by YES Bank and the Financial Times.

Forex losses, CDR

Khan observed that banks do not look at their own corporate hedging policy and get into difficulty when corporate debt restructuring (CDR) cases come up due to foreign exchange (forex) losses.

“CDRs partly have come up due to forex losses and partly due to excessive leverage. Banks must monitor and review to see that the corporates they are financing have a policy for hedging.”

Currently, though Credit Default Swaps and Interest Rate Swaps are there for hedging but they have not been utilised. We have a working group to bring out fixed rate products for hedging purposes, Khan added.

Move in tandem

“Monetary policy has to work in tandem with the fiscal policy. Supply side responses are needed to control inflation and maintain growth,” said Khan.


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