RBI to soon release guidelines on credit enhancements by banks

New Delhi: The Reserve Bank will soon come up with guidelines that will allow banks to provide credit enhancements to be issued by corporate borrowers, Deputy Governor S S Mundra said on September 9.

"There is another serious work in progress, which is to allow banks to provide credit enhancement to be issued by corporate borrowers... hopefully, we will be able to come up with the guidelines on this subject," Mundra said while delivering an inaugural address at a summit on Financing India's Growth -- Way Forward, organised by PHD Chamber.

Mundra also said RBI a few months ago allowed banks to issue long-term infra bonds, and certain exemptions were given to them so as to support growth in the bond market. "The deepening of the bond market has been a subject. I think several committees worked on it for decades.

And right now, there is a committee working on it," he added. "We have an FSDC (Financial Stability and Development Council) sub-committee meeting scheduled for tomorrow. This is also an active agenda." The Deputy Governor stressed that time has come for an efficient bankruptcy code. Mundra also pointed out that are issues of borrowers' obligations on many occasions.

"While the quest to grow is understandable, borrowers cannot exclusively rely on bank funds without permitting their own funds... several large infra projects of extremely low level of equity contribution are leading to extremely high level of leverage," he said. The programme saw the release of a report forecasting that India will need to raise about Rs 47.2 lake core to finance its mega infrastructure projects by March 2019.