has not been a preferred mode for indian corporates. bank finance, coupled with equity markets and external borrowings have been the preferred funding sources. the public financial institutions and financial intermediaries have been dominant issuers although in the recent past following the lack of access to overseas markets the non - financial sectors are also raising funds in this market. 21. the above issues are also not unique to india. even internationally, other than few markets like the us and japan, there are very few liquid secondary bond markets. most corporate bond markets are used by large, highest rated issuers and the investors including in india are typically buy and hold. retail interest is typically low given the relatively low returns compared to equities and aversion to credit risk. 22. following the recommendations of the high level expert committee on corporate bonds and securitisation ( chairman : dr. r h patil ) numerous steps have been taken both on the primary issuance side as well as to smoothen the secondary market trading process for corporate bonds. going forward there is need to have uniform stamp duty, product standardization, centralized database and more importantly the removal of restrictions on long term investors such as insurance companies and pension funds. action also needs to be taken towards improving bankruptcy provisions. 23. foreign investment in corporate bond market has been permitted up to a limit of usd 15 billion, which remains substantially underutilized. apart from this, clearing houses of the exchanges have been given access to the rtgs for settling the otc trades in corporate bonds on dvp basis. 24. it has been argued that if banks are permitted to guarantee corporate bonds, the market may attract more interest. however, such a move will ultimately hinder the development of genuine corporate bond market and more importantly, result in risk concentration within the banking system, which is not the purpose of market - based disintermediation process. 25. recently, repos in corporate bonds have been permitted. only listed corporate debt securities which are rated “ aa ” or above by the rating agencies have been made eligible for repo. to contain leverage, a minimum haircut of 25 per cent has been stipulated and selling of borrowed securities under repo has not been allowed during the period of repo. 26. the stance of the reserve bank towards introduction of repo in corporate bonds needs to be viewed in the perspective of the role of repo in the recent financial crisis. repo is a convenient way for building up of leveraged positions

the product exists or otherwise marked to model, provided all the model inputs are observable market variables and full particulars of the model, including the quantitative algorithm are documented. e. the responsibility for assessment of customer suitability and appropriateness is squarely on the market maker and there are a detailed set of requirements that the market maker needs to fulfil in this regard while selling any product to a user. f. all derivative transactions must be undertaken within the board - approved risk limits. the system of limits should include procedures for the reporting and approval of exceptions to limits. 54. several measures have been taken in the past to improve the efficiency and reliability of the otc market. first, the bank had strengthened the oversight of otc derivatives transactions through institution of mandatory reporting system for the trade transactions. the otc rupee derivatives in india comprise interest rate swaps, forward rate agreements, fx forwards, currency swaps, currency options. the banks have been mandated to report the inter - bank irs trade data on - line to ccil since august 2007. the client level trade data are also now collected from the banks. as and when the system stabilizes, market could be provided with the information. as regards the fx derivatives, the ad category - 1 banks report the trade details of forward contracts, currency swaps and currency option to the bank at fixed periodicity. the reported data provides the basis to the bank to monitor the market wise aggregated exposure level as well as exposure level of individual banks and concentration of exposures to specific asset classes. second, the bank has facilitated greater use of central clearing counterparties ( ccp ) by encouraging clearing initiatives and providing capital relief. currently, the settlement of transactions relating to g - secs, market repo, cblo, fx - spot and forward are settled on guaranteed basis through ccil. third, the bank had promoted use of electronic trade platforms for improving market transparency and efficiency than that available through completely private bilateral negotiation. the electronic trade platforms lower search costs by improving the ability of market participants to more quickly determine the range of prices at which they could potentially execute a trade, and to more quickly and easily identify a counterparty offering attractive terms. the nds - om, nds - call, croms are the landmark innovations in the space of otc fixed income and money market. fourth, the bank had brought in grater transparency through increased dissemination of price and volume information of the otc trades. the price and