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Monetary Policy: Call/Put Options & RBI's New Stance!

Published on Tue, Feb 03,2015 | 20:24, Updated at Tue, Feb 03 at 20:25Source : 

It’s official! The RBI has changed its mind on call & put option pricing in foreign investment agreements. After opposing fixed returns for years, the regulator now seems open to downside protection for foreign investors. In its monetary policy today, the regulator said: “With a view to meeting the emerging needs of foreign direct investment in various sectors with different financing needs and varying risk perceptions as also to offer the investor some protection against downside risks, it has been decided in consultation with the Government of India to introduce greater flexibility in the pricing of instruments/securities, including an assured return at an appropriate discount over the sovereign yield curve through an embedded optionality clause or in any other manner. Guidelines in this regard will be issued separately.”

Attachments : RBI_Monetary Policy.pdf

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