Credit Default Swaps (CDS) can be likened to insurance contracts within the market realm, serving as a safeguard against a borrower's default. These financial instruments play a crucial role in helping mutual funds effectively navigate and mitigate risks.

Subject: Flexibility in participation of Mutual Funds in Credit Default Swaps (CDS) 1. Under the existing regulatory framework, Mutual Funds in India are permitted to participate in CDS transactions only as users i.

Credit Default Swaps are financial contracts that act as a form of insurance against the default of a borrower. In the context of mutual funds, CDS allow funds to manage and mitigate credit risk associated with the bonds or debt securities they hold.

India's markets regulator has allowed mutual funds to both buy and sell credit default swaps (CDSs) under certain conditions, it said in a circular on Friday, in a bid to drive up liquidity in the corporate bond market.

The Securities and Exchange Board of India (Sebi) on Friday allowed mutual funds to participate as both buyers and sellers in the credit default swap (CDS) segment, providing greater flexibility to boost liquidity in the corporate bond market.