Current Affairs · RBI Guidelines on Total Return Swaps
The Reserve Bank of India (RBI) has issued draft guidelines on Total Return Swaps (TRS) specifically aimed at deepening the corporate bond market by expanding the available credit risk transfer toolkit across diverse rating categories. Which one of the following combinations correctly reflects the specific regulatory constraint for non-resident participants and the balance sheet treatment of the underlying security in a TRS contract?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Participation restricted to hedging purposes and the swap buyer pays a fixed fee to physically own the underlying corporate bond
- 2Participation permitted for speculative trading and the underlying security is restricted to an index of AAA-rated bonds only
- 3Participation restricted strictly to hedging purposes and the swap provider maintains the underlying security on its own balance sheet✓
- 4Participation permitted for investment purposes and the swap buyer must record the underlying security on their balance sheet
Correct answer
Participation restricted strictly to hedging purposes and the swap provider maintains the underlying security on its own balance sheet
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