RBI SAYS NO TO BANK GUARANTEES FOR BONDS

The Reserve Bank of India (RBI) had asked banks not to provide guarantees or commitments for issues of bonds or debt instruments by companies. Under the existing rules, banks are only allowed to issue guarantees for loans taken out by corporate. Guarantees by the banking system for a corporate bond or any debt instrument not only have significant systematic implications, but also impede the development of a genuine corporate debt market.