CBLO clocks record Rs 2064 crore volume

Collateralised borrowing and lending obligations (CBLO) as a money market product has swept away all scepticism of its acceptance by clocking a record Rs 2,064 crore volume last Friday.

In the recent past, daily average volume of settlements under CBLO has been around one-third of the total volume of repos done with participants other than the Reserve Bank of India (RBI).

While daily average volume of these category of repos figured at around Rs 3,200-3,800 crore for the week ended February 27, CBLOs hovered around Rs 1,000-1,500 crore.

R H Patil, chairman, Clearing Corporation of India (CCIL), said CBLO is becoming popular not only among public banks and financial institutions but also with cooperative banks.

He also added that more and more cash-rich corporates should join the CBLO programme which offers a lucrative option for parking funds.

Clearing Corporation of India has appointed ICICI Bank and HDFC Bank for CCIL's settlements in the CBLO segment. These two banks, in turn, are instrumental in bringing in cooperative banks as participants to this instrument.

CBLO is a variant of liquidity adjustment facility (LAF) provided by the RBI under repo and reverse repo mechanism.

It has been designed by the Clearing Corporation of India to address short-term fund management issues of entities that has been phased out from the call money market or have been imposed with restrictions on participation in the call money market.

Repo is the process through which the apex bank absorbs liquidity from the system while it injects liquidity through reverse repos.

Over and above, being a fully collateralised product, the important features that make CBLO stand apart are the rollover facility for better portfolio management and early redemption facility which provides an exit route to the participant.

In the foreign exchange market, CCIL has started settlement of all tenures of forex transactions "" cash, tom, spot and forward.

While cash transactions are for settlement today, tom is for tomorrow, spot is for day the after and forward ranges from one-month to 12-month period.

It has already received the RBI approval to start the cross-currency settlement and required software is in the process of being installed.