MUMBAI: The Reserve Bank of India is seeking to expand the availability of credit enhancement facilities for corporate bonds, in a bid to improve their ability to raise funds from the market.
Partial credit enhancement (PCE) — an instrument through which the effective rating of a bond is raised — can now be offered by banks, non-bank lenders and development finance institutions, the central bank said in rules released on Wednesday.
It was earlier offered mostly by banks.
An entity can provide PCE up to a maximum of 50% of the bond issue size, while the limit of such enhancements across entities is also set at 50%, the rules said.
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Such enhancements can be offered to bonds with an initial rating of less than “BBB-”.
If PCE is provided by a non-bank lender, the bonds must be of a minimum duration of three years.
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