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RBI Proposed Introduction of CDS

The Reserve bank of India (RBI) on 4 August 2010 put forth the proposal to introduce credit default swaps, or CDS which are used to offset risks in debt markets in in order to enable firms to hedge against any possible default by a bond issuer. CDS help creditors acquire insurance against the possibility that a borrower might default.

Oct 9, 2010 15:30 IST

The Reserve bank of India (RBI) on 4 August 2010 put forth the proposal to introduce credit default swaps, or CDS which are used to offset risks in debt markets in in order to enable firms to hedge against any possible default by a bond issuer. CDS help creditors acquire insurance against the possibility that a borrower might default. The RBI came out with a draft report on CDS for the third time. The first was in 2003 and second in 2007. The trend of CDS was introduced in the wake of collapse of US investment bank Lehman Brothers Holdings Inc. in 2008 when credit crunch hit the global financial system.