Business Today

Credit derivatives on hold

The subprime crisis has impacted RBI’S plans to liberalise the financial sector. It has now decided to put its plans to introduce credit derivatives on the backburner.

     Print Edition: July 13, 2008

The subprime crisis has impacted RBI’S plans to liberalise the financial sector. It has now decided to put its plans to introduce credit derivatives on the backburner.

 Derivatives on backburner

  • RBI defers plans to introduce credit derivatives
  • Decision is a fallout of the subprime crisis
  • Move could hit growth plans of large companies
Credit derivatives are negotiable bilateral contracts that allow users (like banks) to hedge their exposure to risks.

But the central bank is wary after instances of nonadherence to regulatory guidelines for these products surfaced in the international financial markets.

In a statement, RBI said: “The decision has been taken to learn from the experience of the financial sectors in developed countries.” The move will hit the growth plans of large companies.

 

Rishi Joshi

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