RBI allows banks to be bourse members

The Reserve Bank of India (RBI) on Monday permitted banks to become members of exchanges approved by the Securities and Exchange Board of India (Sebi), to undertake proprietary transactions in the corporate bond market.

RBI said banks should satisfy the membership criteria and comply with regulatory norms of Sebi. This is yet another step from RBI to deepen the corporate bond market but the market seems to have a different view on this.

Merchant bankers said this step would fail to widen the market as most trades in the corporate bond market are over-the-counter and nowhere in today’s notification has RBI said such deals are not permitted.

Also, bankers said the corporate bond market needs a screen-based trading terminal for the market to deepen and then develop further through measures introduced by the central bank earlier.

Earlier, initiatives taken by RBI to deepen corporate bond market included allowing repo transactions in these instruments and it had also introduced credit default swaps.

Time and again top officials from both the government and RBI have said India needs to have a strong corporate bond market to finance the infrastructure sector, but bankers said none of the moves will help unless some basic infrastructure like screen-based trading systems is in place.