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 immediate effect.
(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.
Eligible securities for repo
(1) 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 related entity.
(c) Commercial Papers (CPs) and Certificate of Deposits (CDs).
(d) Units of Debt ETFs
(e) Any other security of a local authority as may be specified in this behalf by the Central Government.
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.
Tenor
Repos shall be undertaken for a minimum period of one day and a maximum period of one year.
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.
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.
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.
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.
Sale and substitution of repoed security
(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.
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 following stipulations:
- Listed 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.
- CPs and CDs shall carry a minimum haircut of 1.5% of market value.
- Securities 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 the security.
Accounting, presentation, valuation and disclosure
(1) Repos shall be accounted by entities regulated by the Reserve Bank as per guidelines.
(2) Other eligible participants may account for repo transactions as per applicable accounting standards.
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.
Documentation
(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.
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