Banks barred from trading in bonds for infrastructure lending: RBI
According to the Reserve Bank of India, banks will not be permitted to trade bonds issued by other lenders for infrastructure lending that would be exempted from mandatory reserve requirements under the new guidelines issued by the RBI.
The RBI recently allowed banks to issue bonds for infrastructure lending, but forbade them from holding each other’s bonds. Now the central bank has clarified that the restrictions on cross holding also applies to trading. The RBI wants these bonds for infrastructure lending attract investors from outside the banking sector. The idea is funds to come from outside the banking system.