The Reserve Bank of India (RBI) is looking at widening the base of the repo market by extending it to non-securities general ledger (non-SGL) account holders such as the constituent SGL (CSGL) account holders, a senior central bank official said.
"We are also looking at introducing longer term repo, roll over of repos, taxation, and standardised accounting are the major areas to be focussed in the near future," said H R Khan, chief general manager, RBI, said at a seminar on debt market organised by Business Asia.
At present, the repo facility is available only to primary dealers and banks, which maintain a SGL account with the RBI. But once CSGL account holders, which among others include small co-operative banks, non-banking finance companies, corporates, and individuals, are allowed the repo facility, then they can borrow by pledging gilts or lend by taking gilts as security.
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A CSGL account is a service provided by SGL holders such as primary dealers (PDs) and banks to those entities not allowed to hold direct SGL with the RBI.
Khan pointed out that the modalities for the introduction of STRIPS (separate trading of registered interest and principal of securities) in government securities was being finalised.
STRIPS let investors hold and trade the individual interest and principal components of eligible treasury notes and bonds as separate securities.
The RBI is also seeking to develop the "when issued" market. When-issued refers to a security being allowed to be traded in the market well before its actual date of issue after announcement about the issue.
Khan said market participants can access data on transactions via the negotiated dealing system (NDS) on the central bank's website in a month's time. This will give security-wise details of transactions and further the price discovery process.
Implementation of the next phase of the public-debt office -- negotiated settlement system project involving integration with security settlement system and primary markets operations, automation and interconnectivity of PDs, electronic maintenance of record of ownership, etc was underway.
G V Nageshwara Rao, managing director, IDBI Capital Market Services, said that for ensuring more liquidity in the gilts market, the RBI should allow short-selling and hedging.
M Natarajan, head (money markets and investments), IndusInd Bank, said for deepening the gilts market newer instruments should be introduced and for widening the market retailing of gilts should be taken up aggressively.