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RBI/2016-17/49
FMRD.DIRD.6/14.03.002/2016-17
August
25, 2016
All Market Participants
Dear Sir/Madam,
Market Repo Transactions in
Government Securities Market
Please refer to paragraph 34 of the fourth Bi-monthly
Monetary Policy Statement 2015-16 dated September 29, 2015 wherein it was
stated that the Reserve Bank will review restrictions placed on repo
transactions, particularly relating to the participation of gilt account
holders in the repo market.
2. Accordingly, the eligibility
conditions and other terms of participation contained in earlier circulars
issued by the Reserve Bank of India in this regard1 have
been relaxed to permit the following transactions:
a.
Gilt
account holders (GAH) may enter into a repo2 transaction
with its custodian or another GAH of the same custodian;
b.
Co-operative
banks may enter into repo transactions with all eligible market
participants, including NBFCs;
c.
Listed
companies may borrow or lend under repos with all eligible market
participants (including banks) without the minimum tenor restriction of
seven days;
d.
Eligible
unlisted companies may borrow from any eligible market participant against
special Government of India securities issued to them;
e.
NBFCs
registered with RBI, including Government companies as defined in
sub-section (45) of section 2 of the Companies Act, 2013 which adhere to
the prudential norms prescribed for NBFCs by the Department of Non-Banking
Regulation, Reserve Bank of India, may borrow/lend under repos with all
eligible market participants.
3. The revised guidelines are as
under:
3.1 Eligibility
(i) Repo transactions may be
undertaken in i) dated securities and Treasury Bills issued by the
Government of India and ii) dated securities issued by the State
Governments.
(ii) Repo transactions in the
above mentioned securities may be entered into by:
a.
persons
or entities maintaining a Subsidiary General Ledger (SGL) account with the
Reserve Bank of India; and
b.
entities,
as specified in the Annex, maintaining
gilt accounts with a bank or any other entity permitted by the Reserve Bank
of India to maintain Constituent Subsidiary General Ledger Account (the
custodian) with its Public Debt Office.
(iii) Accordingly repo
transactions are now allowed between the following permitted entities:
a.
SGL
A/c holders
b.
A SGL
A/c holder and its own gilt account holder (GAH)
c.
A SGL
A/c holder and a GAH under another custodian
d.
GAHs
under the same custodian
e.
GAHs
under two different custodians
3.2 Trading and Settlement
a.
Repo
transactions can be undertaken either on an approved electronic platform or
bilaterally in the OTC market.
b.
All
repo transactions executed in the OTC market must be reported on the
prescribed reporting platform within 15 minutes of the execution of trade.
c.
In
respect of repo transactions involving GAH, including those between the
custodian and its own GAH and two GAHs of the same custodian, the custodian
with whom the gilt accounts are maintained shall be responsible for
reporting the deals on the reporting platform on behalf of the GAH.
d.
All
repo transactions shall be settled in the SGL Account/CSGL Account
maintained with the Reserve Bank of India with the Clearing Corporation of
India Ltd (CCIL) acting as the central counterparty. However, the security
leg of repo transactions between the custodian and its GAH as also those
between two GAHs of the same custodian shall be settled bilaterally, in the
books of RBI and the custodian respectively.
e.
Listed
companies can now lend and borrow funds under repo for periods less than
seven days, including overnight.
f.
Eligible
unlisted companies can only borrow under repos specifically against the
collateral of the special securities issued to them by the Government of
India.
3.3 General Requirements
(i) Banks can undertake repo
transactions only in securities held in excess of the prescribed Statutory
Liquidity Ratio (SLR) requirements.
(ii) Custodians should put in
place an effective system of internal control and concurrent audit and
ensure compliance.
(iii) Regulated entities are
required to adhere to the prudential guidelines prescribed by the
respective regulator for undertaking repo transactions.
4. Re-repo of securities
acquired under reverse repo will continue to be permitted for the SGL
account holders in terms of the circular No.
FMRD.DIRD.5/14.03.002/2014-15 dated February 5, 2015. However,
entities, other than SGL account holders are not permitted to re-repo
securities borrowed under reverse repo transaction.
5. The above revised guidelines
are issued in exercise of the powers conferred by Section 45W of the
Reserve Bank of India Act, 1934 and shall come into effect from September
6, 2016. The guidelines will be subject to periodic review.
Yours
faithfully,
(R.
Subramanian)
Chief General Manager
Annex
List of entities maintaining
gilt accounts and which are permitted to undertake repo transactions in
Government securities
i.
Any
scheduled bank
ii.
Any
primary dealer authorised by the Reserve Bank of India
iii.
Any
non-banking financial company registered with the Reserve Bank of India,
including Government companies as defined in sub-section (45) of section 2
of the Companies Act, 2013 which adhere to the prudential norms prescribed
for NBFCs by the Department of Non-Banking Regulation, Reserve Bank of
India
iv.
Any
mutual fund registered with the Securities and Exchange Board of India
v.
Any
housing finance company registered with the National Housing Bank (NHB)
vi.
Any
insurance company registered with the Insurance Regulatory and Development
Authority of India
vii.
Any
pension fund/provident fund regulated by the Pension Fund Regulatory and
Development Authority
viii.
Any
non-scheduled Urban Co-operative bank
ix.
Any
State and District Central Co-operative bank
x.
Any
All India Financial Institution (FIs) viz. Exim Bank, NABARD, NHB and SIDBI
xi.
Any
listed company having gilt account with a scheduled commercial bank
xii.
Any
unlisted company which has been issued special securities by the Government
of India
xiii.
Any
other entity specifically permitted by the Reserve Bank of India
1 IDMC/PDRS/3432/10.02.01/2002-03 dated February 21, 2003 on ready forward contracts and the
subsequent revisions conveyed vide circulars IDMD/PDRS/4779/10.02.01/2004-05
dated May 11, 2005 and IDMD.DOD.No.334/11.08.36/2009-10
dated July 20, 2009.
2 For the purpose of
this circular, repo has been used as a generic name for both repo and
reverse repo transactions.
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