Get on With Corporate Bond Purchases, RBI
Get on With Corporate Bond Purchases, RBI – Reserve Bank of India (RBI) with repurchase obligations (repo) in government securities of the order of Rs 1 lakh crore must prop up liquidity within the economic system slated in March when RBI has been boosting liquidity lately. But while abundant liquidity within the banking industry is important, it’s never sufficient. The financial institution has got to be before the curve and duly step-up repo in corporate bonds.
With the necessity to spice up liquidity for MFs assets of over Rs 28 lakh crore — the outflows now add up to Rs 50,000 crore daily. Hence the rising redemptions within the mutual funds (MF) industry lately with a repo window for corporate bonds and cash equivalent.
For seeking substantial liquidity injection via repo in corporate bonds; Amfi, the Association of Mutual Funds in India, is reported as RBI must concur by subscribing to bonds of huge corporates and non-banks RBI also must consider directly, on which has central counterparty clearing albeit as late as November 2018. Tri-party segment remains restricted for repo order-matching platform, Treps, to AAA-rated bonds. minister of finance Nirmala Sitharaman, in her maiden budget in 2019, did propose that AA-rated bonds even be allowed as collateral.
It must progress from promise to reality. In tandem, we’d like an enabling framework for a lively and vibrant bond market, including liquidity in insurance products like credit default swaps and routine scope for ‘netting’ financial exposure with counterparties.
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