RBI to put in place new system for settlement of bond trade

KOLKATA: The Reserve Bank will soon put in place a mechanism to facilitate settlement of trading in corproate and other bonds through a clearing house, a move that will infuse transparency and encourage development of bond market, SEBI Chairman C B Bhave said today.

"RBI has agreed to a facility by which the money will lie with the central bank and not with banks and this system will be in place in the next couple of months," SEBI chief told reporters here.

The steps, likely to be introduced by RBI in the next couple of months, would facilitate settlement of bond trade through a clearing house mechanism.

At present, as the number of participants is less, traders usually to settle the trade in bonds bilaterally.

The new initiatives will do away with bilateral settlement of trades and infuse transparency in the bond market trading system.

Despite the deals are few, the size of trade is huge and thus there had been a issue of confidence among the institutions for going ahead with settlement only through a few banks.

To allay this fear, SEBI had requested RBI to facilitate with clearing corporation so that money lies with RBI during pay-in and pay-out.
However, despite this reform the hope of retail participation in debt in secondary market remains bleak as the number of participants in bond market is limited to institutions.

Bhave said SEBI had initiated some measures to enhance the depth in the market. FIIs participation to a limit of USD 15 billion and corpus from the new pension scheme to get routed in the bond market.

SEBI has also come out with simplified listing norms for those companies issuing debt instruments.