All Scheduled Commercial Banks
(Excluding Regional Rural Banks),
Scheduled Urban Co-operative Banks and
Standalone Primary Dealers
Security Substitution Facility
for term repos conducted by Reserve Bank of India under the Liquidity
As announced in the First
Bi-monthly Monetary Policy Statement for 2017-18, it has been decided to
allow substitution of collateral (security) by the market participants
during the tenor of the term repos conducted by Reserve Bank of India under
the Liquidity Adjustment Facility, from April 17, 2017.
2. The securities offered for
substitution by the market participants shall be of similar market value
based on the latest prices published by the Fixed Income Money Market and
Derivatives Association of India (FIMMDA).
3. The facility will be
available in the e-kuber portal from Monday to Friday between 9:00 a.m. and
5:00 p.m. on all working days in Mumbai.
4. Market participants facing genuine
technical problem on any specific day can submit the security substitution
request through e-mail or by fax (no. 022-22630981) before 4:45
5. An illustration regarding
security substitution is furnished in the Annex.
(Radha Shyam Ratho)
Chief General Manager
Substitution of securities in term repos under the liquidity adjustment
April 18, 2017
successful bid of Rs.200 crore in 14 day Term Repo auction on April 18,
2017, a participant provides a Central Govt. security 8.40% GS 2024 worth
Rs. 208 crore market value (including 4% margin for Central Government
dirty price of the security is calculated based on the latest file
published by FIMMDA i.e. of April 17, 2017. Assume the price to be Rs.110.
the face value of security 8.40% GS 2024 that is debited from Repo
Constituent (RC) account (after rounding-up) would be Rs.189.091 crore (208
x 100 /110).
April 20, 2017
participant chooses to substitute
Rs.100 crore face value of
the security 8.40% GS 2024 with a new security 8.83% GS 2023 on April 20,
dirty price of 8.83% GS 2023 would be based on the latest available FIMMDA
price in the system i.e. the file published on April 19, 2017. Assume the
price to be 115.
amount of security 8.83% GS 2023 which has to be provided by the market
participant in his Repo Constituent in order to substitute the security 8.40%
GS 2024 would be calculated as follows:
Required face value of new security to be substituted =
(Market Value of the security intended to be withdrawn, i.e. 8.40 % GS
2024, based on April 17, 2017 price) x 100 / (latest market price of the
security offered as substitution, i.e. 8.83% GS 2023, based on April 19,
2017 price = 110 * 100/115 = 95.652
in order to substitute Rs.100 crore face value of security 8.40% GS 2024,
the participant has to provide Rs. 95.652 crore face value of new security
8.83% GS 2023.
State Government security
State government security is offered for substitution, then it would
attract 6% margin as hitherto.