The Reserve Bank of India (RBI) opened the door on Thursday to foreign institutional investors (FIIs) using investments in corporate and government bonds as collateral in the futures and options segment of stock exchanges.

The move announced by the RBI is expected to improve liquidity in the derivatives market, one foreign bank dealer said.

The RBI also said it was permitting FIIs to use their investments in corporate bonds as collateral in the cash segment of the stock market.

The RBI also mandated banks to report all over-the-counter currency derviative deals with clients on the central bank promoted reporting platform known as the Clearing Corp of India Ltd (CCIL) from April 2, it said in a separate circular.

This will improve transparency and provide a better guage to the central bank on the extent of derivative exposure that corporates have, a senior official at CCIL said.