Foreigners can use bonds as collateral

Foreigners can use bonds as collateral
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First Published: Fri, Jul 20 2007. 05 15 PM IST
Updated: Fri, Jul 20 2007. 05 15 PM IST
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Mumbai: The Reserve Bank of India (RBI) will allow clearing houses of stock exchanges to accept foreign securities as collateral from overseas investors who want to invest in the derivatives segment of the Indian equities market.
In a notification posted on its website late on Thursday (19 July), the RBI has asked clearing houses to open electronic holding accounts with foreign depositories to hold foreign securities offered by overseas investors as collateral.
Analysts said it appeared to be a move to ease some upward pressure on the rupee that would also make it easier for foreign investors, as they can now use foreign bonds rather than cash as collateral.
“If the margining requirement goes up or more collateral was needed, foreigners had to bring in more dollars, which in turn leads to more appreciation pressure,” a local analyst said.
The rupee was quoting at 40.31/32 on Friday 20 July, just below a nine-year high of 40.28 per dollar it hit in May. It has gained more than 9.5% against the dollar so far in 2007 to be Asia’s best-performing currency.
The rupee’s rise has hurt exporter’s margins, prompting the government to announce steps including interest rate cuts and tax breaks for exporters.
The RBI has asked clearing houses to report their balances of foreign securities held as collateral on a monthly basis.
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First Published: Fri, Jul 20 2007. 05 15 PM IST
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