Under the existing rules, banks are only allowed to issue guarantees for loans taken out by corporates, it said.
“Guarantees by the banking system for a corporate bond or any debt instrument not only have significant systemic implications, but also impede the development of a genuine corporate debt market,” RBI said in a statement.
Earlier in May, top lender State Bank of India guaranteed a Rs 42 billion bond issue by Tata Motors, boosting demand and helping it price the bonds competitively, despite the possibility of a ratings downgrade.
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