The Reserve Bank of India (RBI), in consultation with the Fixed Income Money Markets and Derivatives Association of India (Fimmda), has laid down uniform accounting principles for repo/reverse repo transactions undertaken by all the regulated entities. The accounting principles will be applicable from the financial year 2003-04.
The norms, for the present, would not apply to repo / reverse repo transactions under the Liquidity Adjustment Facility (LAF) with RBI.
On implementation, market participants may undertake repos from any of the three categories of investments, viz., Held For Trading, Available For Sale and Held To Maturity, the central bank said.
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The following accounts may be opened, viz. i) Repo Account, ii) Repo Price Adjustment Account, iii) Repo Interest Adjustment Account, iv) Repo Interest Expenditure Account, v) Repo Interest Income Account, vi) Reverse Repo Account, vii) Reverse Repo Price Adjustment Account, and viii) Reverse Repo Interest Adjustment Account.
The securities sold/ purchased under repo should be accounted for as an outright sale / purchase.
The securities should enter and exit the books at the same book value. For operational ease the weighted average cost method whereby the investment is carried in the books at their weighted average cost may be adopted.