It
has been decided to keep in abeyance the issuance of the final guidelines on introduction
of credit derivatives in India. The decision has been taken so as to be able to
draw upon the experience of the financial sector of some of the developed countries,
particularly in the current circumstances, in which the entire dimensions of the
recent credit market crisis have not yet been gauged. It
may be recalled that the Reserve Bank of India had issued the ‘Draft Guidelines
for Introduction of Credit Derivatives in India’, on March 26, 2003, inviting
comments from banks and other stake holders. However, taking into account the
status of the risk management practices then prevailing in the banking system,
the issuance of final guidelines had been deferred. Subsequently,
it was announced in the Annual Policy Statement for 2007-08 (paragraph 175) that
as a part of the gradual process of financial sector lilberalisation in India,
it was considered appropriate to introduce credit derivatives in a calibrated
manner. Modified draft guidelines on Credit Default Swaps were, therefore, issued
on May 16, 2007. Based on the feedback received on draft guidelines, these were
revised and a second draft of the guidelines was issued, on October 17, 2007,
for another round of consultation. However, in view of
certain adverse developments witnessed in different international financial markets,
particularly the credit markets, resulting in considerable volatility in the recent
past, such as mounting losses suffered by banks on account of sub-prime crisis,
need for the central banks of those countries to inject liquidity into the system,
as also the level of risk management systems and possible non-adherence to the
regulatory guidelines on complex products such as credit derivatives, time is
not considered opportune to introduce the credit derivatives in India, for the
present. Alpana Killawala
Chief General Manager Press
Release : 2007-2008/1624 |
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