The Reserve Bank has allowed all financial institutions to participate in the Credit Default Swap, CDS, market to help such entities to protect their risk. The RBI in the notification said in Mumbai yesterday that it has now been decided to permit all India financial institutions, namely, EXIM Bank, NABARD, NHB and SIDBI to participate in the CDS market as user to hedge the underlying credit risk in corporate bonds in their portfolio. The CDS is a guarantee in which the buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap.