The State Bank of India (SBI) and Standard Chartered Bank India carried out the Credit Default Swap
(CDS) trade worth Rs 25 crore. The trade involved a 1-year rupee CDS featuring REC, senior executives at Standard Chartered Bank told ET.
About Credit Default Swap:
1. As per the agreement's terms, the CDS buyer pays the seller regularly until the credit maturity date.
2. Credit Default Swap (CDS) is a type of credit derivative that will help manage and transfer credit risk while providing buyer protection against possible default.
3. The seller will reimburse the buyer for all premiums and interest that would have been paid through the maturity date if the debt issuer defaults.
RBI CDS Guidelines:
1. The revised RBI guidelines apply to credit derivatives transactions undertaken in Over-the-Counter (OTC) markets and on recognized stock exchanges in India.
2. The updated CDS Guidelines were released by RBI and went into effect on May 9, 2022.
3. Residents and non-residents who meet the requirements of the Foreign Exchange Management (Debt Instruments) Regulations 2019 to invest in corporate bonds and debentures are entitled to participate in the credit derivatives market.
About State Bank of India (SBI):
Chairman– Dinesh Kumar Khara
Headquarters– Mumbai, Maharashtra
Establishment – 1955
