No bank guarantees for bonds, says RBI


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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