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of <h1>Mutual Funds Allowed in CDS Market as Protection Buyers; Must Follow RBI Guidelines and Disclosure Rules.</h1> The circular permits mutual funds to participate in the Credit Default Swaps (CDS) market as protection buyers, following guidelines from the Reserve Bank of India (RBI). Mutual funds can only hedge credit risk on corporate bonds within Fixed Maturity Plans exceeding one year and must buy CDS from RBI-approved market makers. Exposure limits are set, and funds must have a written policy approved by their board and trustees. Additionally, mutual funds are allowed to engage in repo transactions in corporate debt securities rated AA and above. The circular aims to protect investors and promote market development, with detailed disclosure requirements for CDS transactions.
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