The Hindu Business Line : RBI permits UCBs, listed cos to participate in repos

THE Reserve Bank of India (RBI) has permitted sale of Government securities allotted in primary issues on the day of allotment, with and between consistent subsidiary general ledger (CSGL) account holders, with immediate effect. This was proposed in the credit policy 2005-06.

The RBI has also permitted urban scheduled co-operative banks (UCBs) and listed companies having gilt accounts to participate in repo facility in Government securities.

Listed companies that wish to participate in repo transactions should meet the following requirements:

(a) The minimum period for reverse repo (lending of funds) by listed companies is seven days. However, listed companies can borrow funds through repo for shorter periods including overnight.

(b) Where the listed company is a `buyer' of securities in the first leg of the repo contract (i.e., lender of funds), the custodian through which the repo transaction is settled should block these securities in the gilt account and ensure that these securities are not further sold or re-repoed during the repo period but are held for delivery under the second leg; and

(c) The counterparty to the listed companies for repo/reverse repo transactions should be either a bank or a primary dealer maintaining SGL Account with the RBI.

Though co-operative banks are not allowed to enter into repo transactions with non-banking financial companies, they can enter into transactions with primary dealers in Government securities.

As of now, commercial banks, primary dealers, NBFCs, mutual funds, housing finance companies, and insurance companies are permitted to participate in repo facility.

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