Mumbai, June 19: The Reserve Bank of India (RBI) has decided to postpone the introduction of credit derivatives.

The central bank wants to draw upon the experience of some countries where the credit crisis has not yet been fully measured before introducing such derivatives.

Credit derivatives are instruments for which the underlying asset is a loan or other asset. It transfers credit risk on loans and advances, investments and other exposures from a buyer to a seller, without transferring the underlying asset.

These instruments were blamed for the crisis that rocked financial markets last year and punched gaping holes in the balance sheets of renowned banks and leading investment banking entities which had to make huge provisions to cover their losses.

In a statement issued today, the RBI said given certain “adverse developments” in different international financial markets, particularly the credit markets and the mounting loss suffered by banks on account of the sub-prime crisis, the time was not ripe for credit derivatives in India.

In other words, RBI fears that Indian banks can run the same risks if they take positions on credit derivatives at a time when the full impact of the sub-prime crisis has still to play out.

Commenting on the decision to not implement the final guidelines on credit derivatives, RBI said it had been forced to draw upon the experience of the financial sector of some of the developed countries, particularly in the current circumstances, in which the entire dimensions of the recent credit market crisis had not yet been gauged.

The RBI had issued the draft guidelines for credit derivatives on March 26, 2003, inviting comments from banks and other stakeholders.