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Mumbai, Aug 6: In view of the expansion of the bond market, the Reserve Bank of India on Thursday allowed banks to invest in bonds. Banks will be able to invest in bond securities through mutual funds and exchange traded funds without any additional charge allocation. According to Basil three guidelines, if a bank acquires bond securities directly, it has to allocate less capital in exchange for investments made in the same bond through a mutual fund or an exchange traded fund. Issuance of Reserve Bank’s Bi-monthly Monetary Review Policy
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On August 6, in view of the expansion of the bond market, the Reserve Bank of India on Thursday allowed banks to invest in bonds. Banks will be able to invest in bond securities through mutual funds and exchange traded funds without any additional charge allocation. According to Basil Three Guidelines, if a bank acquires bond securities directly, it has to allocate less capital in exchange for investments made in the same bond through mutual funds or exchange-traded funds. After issuing the Reserve Bank’s bi-monthly monetary review policy, Shaktikanta Das, the governor of the central bank, said that the decision has been taken by normalizing different types of behavior in the current system. This will increase the capital savings of banks and will also give a boost to the corporate bond market. In such cases, banks hold nine per cent on both direct bonds or investments made through mutual funds or ETFs.
