Permits foreign sovereign securities as collateral

The Securities and Exchange Board of India (Sebi) has allowed the clearing members to accept foreign sovereign securities with 'AAA' rating as collateral from FIIs, for exchange traded derivative transactions.

The foreign sovereign securities shall be treated as a part of the cash component of the liquid assets of the clearing member. These shall be subject to the condition that the value of the foreign sovereign securities shall not be more than 10 per cent of total cash component.

The FIIs have been depositing collateral in the form of cash so far.

To begin with, US Government securities with 'AAA' rating are eligible to be tendered as collateral by foreign institutional investors (FIIs).