The Reserve Bank of India (RBI) is looking to allow partial credit enhancement by banks for infrastructure companies to issue bonds, a senior official said on Monday.
?The partial credit enhancement by banks for infrastructure companies is on the anvil. It has taken a little more time than envisaged. But we are trying to balance between the market demand and the regulatory norms that have to be there,? Chandan Sinha, executive director at RBI, said.
In November, RBI had allowed foreign institutional investors to invest up to $5 billion in credit-enhanced bonds issued locally by Indian companies. Credit-enhanced bonds are debt instruments that can be issued by lower-rated companies to improve the credit profile of their debt issuances.
Speaking at an interactive session organised by the CII, Sinha said corporates should voluntarily access the bond market for meeting their financial needs as this would lead to development of the market. ?The whole idea of a corporate bond market is to diversify risks from the banking system. But, in India, we make banks investors in corporate bonds perhaps to the same extent in which they have their loan exposures,? he added.