All participants in repo markets
Transactions (Repo) (Reserve Bank) Directions, 2018
Please refer to Paragraph 5 of
the statement on Developmental and Regulatory
Policies, Reserve Bank of India issued as part of the sixth Bi-monthly Monetary Policy Statement for 2017-18
dated February 07, 2018 regarding issuance of comprehensive
2. The draft directions were
released for public comments on March 01,
2018. Based on the feedback received from the market participants,
the Repurchase Transactions (Repo) (Reserve
Bank) Directions, 2018 have been reviewed and have since been
finalized. The Directions are enclosed herewith.
Chief General Manager
BANK OF INDIA
FINANCIAL MARKETS REGULATION DEPARTMENT
1ST FLOOR, CENTRAL OFFICE, FORT
MUMBAI 400 001
(TRS)-2018 dated July 24, 2018
Transactions (Repo) (Reserve Bank) Directions, 2018
In exercise of the powers
conferred by section 45W of the Reserve Bank of India Act, 1934 (RBI Act)
and of all the powers enabling it in this behalf, the Reserve Bank of India
(the Reserve Bank) having considered it necessary in public interest and
with a view to regulate the financial system of the country to its
advantage, hereby issues the following directions to all the persons eligible
to participate or transact business in market repurchase transactions
(repos) in India.
1. Short title, commencement and
applicability of the directions
(1) These Directions shall be
called as the Repurchase Transactions (Repo) (Reserve Bank) Directions,
2018 and shall supersede all other directions issued on the subject and
covered by these regulations. These Directions shall come into force with
(2) These Directions shall be
applicable to repurchase transactions (Repo), undertaken on recognized
stock exchanges, electronic trading platforms (ETP) and Over-the-Counter
(OTC) to the extent stated herein. In case of exchange traded repurchase
transactions (Repo), procedure for execution and settlement of trades shall
be in accordance with the rules and regulations issued by the recognized
stock exchange/Securities and Exchange Board of India (SEBI).
(3) These Directions shall not
apply to repo/ reverse repo transactions under the Liquidity Adjustment
Facility and the Marginal Standing Facility, which would continue to be
regulated as per the existing regulations.
(1) In these Directions, unless
the context otherwise requires-
(a) “Corporate bonds and debentures” mean non-convertible debt securities issued in
India which create or acknowledge indebtedness, including (i) debentures
(ii) bonds (iii) commercial papers (iv) certificate of deposits and such
other securities of a company, a multilateral financial institution (MFI)
or a body corporate constituted by or under a Central Act or a State Act,
whether constituting a charge on the assets of the company or body
corporate or not, but does not include debt securities issued by Central
Government or a State Government, or such other persons as may be specified
by the Reserve Bank, security receipts and securitized debt instruments.
(b) “Commercial Paper (CP)” is an unsecured money market instrument issued in
the form of a promissory note. The original tenor of a CP shall be between
seven days to one year.
(c) “Certificate of Deposit (CD)” is a negotiable money market instrument and issued
in dematerialized form or as a Usance Promissory Note against funds
deposited at a bank or other eligible financial institution for a specified
(d) “Delivery versus Payment (DvP)” is a settlement mechanism which stipulates that
transfer of funds from the buyer of securities is made simultaneously with
the transfer of securities by the seller of securities.
(e) “Government securities” shall have the same meaning as defined in Section
2(f) of the Government Securities Act, 2006.
(f) “Haircut” is
the difference between the market value of the collateral and the amount
borrowed/lent against that collateral.
(g) “Listed corporate” means
a company or firm whose shares and (or) debt are listed and traded on a
recognized stock exchange/s.
(h) “MFIs” are
multilateral financial institutions in which Government of India is a
(i) “Recognized stock exchange” shall have the same meaning as defined in Section
2 (f) of Securities Contracts (Regulation) Act, 1956 (42 of 1956).
(j) “Regulated entity” means
any person, other than an individual or HUF, whose business activities are
being regulated by any one of the financial regulators in India viz.,
Reserve Bank of India, Securities and Exchange Board of India (SEBI),
Insurance Regulatory and Development Authority of India (IRDAI), Pension
Fund Regulatory and Development Authority (PFRDA), National Housing Bank
(NHB) and National Bank for Agriculture and Rural Development (NABARD).
(k) “Related entity” of
a company or a firm means any company or firm which is (i) a holding,
subsidiary or an associate company of such company; or (ii) a subsidiary of
a holding company to which it is also a subsidiary. The holding, subsidiary
and associate company shall have the same meaning as defined in Companies
(l) “Repo” shall
have the same meaning as defined in Section 45U (c) of RBI Act, 1934.
“Reverse Repo” shall have the same meaning as defined in Section
45U (d) of RBI Act, 1934.
Explanation: A ‘repo’ transaction by an entity is ‘reverse
repo’ transaction for the counterpart entity. For the purpose of these
Directions, the word ‘repo’ is used to mean both ‘repo’ and ‘reverse repo’
with the appropriate meaning applied contextually.
(m) “Securitized debt instrument” means securities of the nature referred to in
sub-clause (ie) of clause (h) of section 2 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956).
(n) “Security Receipts” means
a security as defined in clause (zg) of section 2 of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (54 of 2002).
(o) “Tri-party repo” means
a repo contract where a third entity (apart from the borrower and lender),
called a Tri-Party Agent, acts as an intermediary between the two parties
to the repo to facilitate services like collateral selection, payment and
settlement, custody and management during the life of the transaction.
(p) The words and expressions
used, but not defined in these Directions, shall have the meaning assigned
to them in the Reserve Bank of India Act, 1934, or in any other Master
Circular/Notification/Direction issued by the Reserve Bank, unless anything
is stated by the Reserve Bank to the contrary.
3. Eligible securities for repo
The securities eligible for repo
under these Directions shall include:
(a) Government securities issued
by the Central Government or a State Government.
(b) Listed corporate bonds and
debentures, subject to the condition that no participant shall borrow
against the collateral of its own securities, or securities issued by a
(c) Commercial Papers (CPs) and
Certificate of Deposits (CDs).
(d) Any other security of a
local authority as may be specified in this behalf by the Central
4. Eligible participants
(1) The following are eligible
to participate in repo transaction under these Directions:
(a) Any regulated entity.
(b) Any listed corporate.
(c) Any unlisted company, which
has been issued special securities by the Government of India, using only
such special securities as collateral.
(d) Any All India Financial
Institution (FIs) viz. Exim Bank, NABARD, NHB and Small Industries
Development Bank of India (SIDBI), constituted by an Act of Parliament and
(e) Any other entity approved by
the Reserve Bank from time to time for this purpose.
Repos shall be undertaken for a
minimum period of one day and a maximum period of one year.
6. Tri-Party Agent
The eligibility criteria, roles
and obligation, application procedure for authorization, and exit procedure
for Tri-party Agent are given in Annex I of
7. Trading venues
Repo transactions may be traded
on any recognized stock exchanges, or an electronic trading platform (ETP)
duly authorised by the Reserve Bank or in the over-the-counter (OTC)
market. However, prior approval of the Reserve Bank is required for trading
repos on any trading platform, including on recognized stock exchanges.
8. Trading process
Repo transactions, including
tri-party repo transactions, may use any mutually agreed trading process,
including but not limited to, bilateral or multilateral, quote driven or
order driven processes, anonymous or otherwise.
9. Reporting of trades
(1) All repo transactions, other
than those on recognized stock exchanges or on approved electronic trading
platforms, that disseminate trade information on the platforms, shall be
reported within 15 minutes of the trade: repo in corporate securities to
the reporting platform F-TRAC and repo in Government securities to the
Clearcorp Repo Order Matching System (CROMS), respectively.
(2) All trading and reporting
platforms, including recognized stock exchanges, for repo transactions
shall provide any data or other information to the Reserve Bank or to any
entity as may be required by the Reserve Bank.
(3) The participants to repo
transactions acting under these Directions shall furnish any information or
data sought by the Reserve Bank within the period stipulated in the
letter/mail issued to the participant to furnish such information or data.
10. Settlement of trades
(1) Settlement of trades under
these Directions shall be-
(a) The first leg of all repo
transactions shall settle either on a T+0 or T+1 basis.
(b) All repo transactions shall
settle on a Delivery vs Payments (DvP) basis.
(c) All repos in government
securities shall settle through CCIL or any other clearing agency approved
by the Reserve Bank.
(d) All repos in corporate bonds
and debentures shall settle through the clearing house of exchanges or any
other entity which has been approved by the Reserve Bank.
11. Sale and substitution of
(1) Securities purchased under
repo may be-
(a) On-sold either as an
outright transaction or as part of another repo transaction. Outright sale
of securities acquired under repo shall be undertaken only by such entities
that are eligible to undertake short sale transactions in terms of the
relevant directions of the Reserve Bank and in such securities that are
permitted to be short sold.
(b) Substituted by another
security in terms of the rules of any approved clearing agency.
12. Pricing of collateral,
haircut and margining
(1) In case of repo transactions
under these Directions-
(a) Collaterals shall be priced
transparently at prevailing market prices, in the first leg of a repo.
(b) The price for the second leg
will be the price for the first leg plus interest.
(c) Haircut/ margins will be
decided either by the clearing house or may be bilaterally agreed upon, in
terms of the documentation governing repo transactions, subject to the
corporate bonds and debentures shall carry a minimum haircut of 2% of
market value. Additional haircut may be charged based on tenor and
illiquidity of the security.
and CDs shall carry a minimum haircut of 1.5% of market value.
issued by a local authority shall carry a minimum haircut of 2% of market
value. Additional haircut may be charged based on tenor and illiquidity of
13. Accounting, presentation,
valuation and disclosure
(1) Repos shall be accounted by
entities regulated by the Reserve Bank as per guidelines contained in Annex II.
(2) Other eligible participants
may account for repo transactions as per applicable accounting standards.
14. Computation of Cash Reserve
Ratio (CRR) /Statutory Liquidity Ratio (SLR) and borrowing limit
(1) Funds borrowed under repo
including tri-party repo in government securities shall be exempted from
CRR/SLR computation and the security acquired under repo shall be eligible
for SLR provided the security is primarily eligible for SLR as per the
provisions of the Act under which it is required to be maintained.
(2) Borrowings by a bank through
repo in corporate bonds and debentures shall be reckoned as liabilities for
Cash Reserve Ratio/ Statutory Liquidity Ratio requirement and, to the
extent these liabilities are to the banking system, they shall be netted as
per section 42(1) of the RBI Act, 1934.
(1) Participants shall enter
into standard bilateral master repo agreements as per the documentation
finalized by FIMMDA,
(2) Repo transactions traded on
a multilateral trading platform shall be governed by the rules and
regulations of the platform where it is traded.
(3) In case of tri-party repos,
separate agreements between a participant and a tri-party agent shall be
executed as per the documentation prescribed by the tri-party agent.
16. The list of previous
circulars issued by the Reserve Bank on repo transaction that are repealed
and withdrawn are given at Annex III hereunder.
Chief General Manager
Circular No. IDMC/PDRS/3432/10.02.01/2002-03 dated February 21,
Circular No. IDMD/PDRS/4779/10.02.01/2004-05 dated May 11, 2005.
Circular No. IDMD.DOD.No.334/11.08.36/2009-10 dated July 20,
Circular No. IDMD.DOD.No.04/11.08.38/2009-10 dated January 8,
Circular No. IDMD.DOD.No.05/11.08.38/2009-10 dated January 8,
Circular No. IDMD/4135/11.08.43/2009-10 dated March 23, 2010.
No. IDMD.DOD.08/11.08.38/2009-10 dated April 16, 2010.
Circular No. IDMD.PCD.No.21/11.08.38/2010-11 dated November 9,
Circular No. IDMD.PCD.No.22/11.08.38/2010-11 dated November 9,
Circular No. IDMD No./29/11.08.043/2010-11 dated May 30, 2011.
Circular No. IDMD.PCD.1423/14.03.02/2012-13 dated October 30,
No. IDMD.PCD.08/14.03.02/2012-13 dated January 4, 2013.
Circular No. IDMD.PCD.No.08/14.03.02/2012-13 dated January 7,
Circular No. IDMD.PCD.No.09/14.03.02/2012-13 dated January 7,
Circular No. IDMD.PCD.13/14.01.02/2013-14 dated June 25, 2014.
Circular No. FMRD.DIRD.3/14.03.002/2014-15 dated February 03,
Circular No. FMRD.DIRD.4/14.03.002/2014-15 dated February 03,
Circular No. FMRD.DIRD.5/14.03.002/2014-15 dated
February 05, 2015.
Circular No. FMRD.DIRD.07/14.03.002/2014-15 dated May 14, 2015.
Circular No. FMRD.DIRD.08/14.03.002/2014-15 dated May 14, 2015.
No. FMRD.DIRD.4/14.01.009/2016-17 dated August 25, 2016.
Circular No. FMRD.DIRD.5/14.01.009/2016-17 dated August 25,
Circular No. FMRD.DIRD.6/14.03.002/2016-17 dated August
Circular No. FMRD.DIRD.4/14.03.024/2017-18 dated August