India's central bank, The Reserve Bank of India has introduced trading in credit- default swaps in India to attract investors to the country's corporate bond market, a move that would increase inflows into the country and help control the fall in the rupee.

The central bank has also created rules limiting the scope of the market. The RBI now allows domestic lenders and units of foreign banks to purchase credit- default swaps contracts to "hedge" assets and trading positions, according to a notification from the central bank.

The move comes eight years after first proposing the derivatives. The central bank delayed its decision in 2003 due to the need for banks to improve risk management and again in 2008 due toe ht global economic crisis.

Prime Minister Manmohan Singh has planned to infuse $1 trillion by 2017 to upgrade the nation's infrastructure and boost growth and analysts believe that a substantial part of the investment will have to come from abroad.

Foreign banks want the central bank to open up the CDS to foreign investors. The CDS pay the buyer face value in exchange of securities or the cash equivalent if a buyer is unable to respect debt obligation. A basis point, or 0.01 percentage point, equals $1,000 a year on a contract protecting $10 million of debt for five years.