RBI delays introduction of credit derivatives

The RBI deferred introduction of credit derivatives in the country
saying it will first study the experiences of other developed
financial markets.


"It has been decided to keep in abeyance the issuance of the final
guidelines on introduction of credit derivatives in India," the RBI
said in a release on Thursday.


The decision has been taken to "be able to draw upon the experience of
the financial sector of some of the developed countries," it added.


"Taking into account the status of the risk management practices then
prevailing in the banking system, the issuance of final guidelines had
been deferred," the statement said.


A senior banker commenting on the RBI's move said, "With the current
controversy in the credit derivative market internationally, this
would not be the right time for introduction of the same in India."


The central bank had issued the Draft Guidelines for Introduction of
Credit Derivatives in India, in March 2003 and had also invited
comments from banks on the issue.


The introduction of these financial instruments was later announced at
the Annual Policy Statement for the year 2007-08.



"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," RBI said.