To boost the tepid corporate bonds market, RBI today allowed bonds issued in Indian market by multilateral agencies such as World Bank Group, ADB and African Development Bank to be considered as eligible underlying for repo in corporate debts.
The move comes into force with immediate effect in the bonds market, which as percentage of India's GDP, is only about 3 per cent now.
"Bonds rated 'AA' or above by rating agencies, and which are issued by multilateral financial institutions like the World Bank Group (eg, IBRD, IFC), Asian Development Bank or African Development Bank and other such entities as may be notified by the Reserve Bank from time to time, are eligible for forward contracts in corporate debts," the RBI said in a notification.
The RBI said commercial banks, excluding RRBs and LABs, authorised primary dealers, registered NBFCs, Exim Bank, Nabard, NHB, Sidbi, IIFCL, urban cooperative banks, mutual funds, housing finance companies and insurance companies, are eligible for participating in this.
Eligible underlying collateral for repo in corporate debts include listed corporate debt securities of original maturity of one year which are rated 'AA' or above by the Sebi-registered rating agencies, and which are held in the security account of the repo seller, in demat form.
Instruments like commercial papers, certificates of deposit and non-convertible debentures of original maturity up to one year, which are rated A2 or above, are also eligible for such repo deals.
The RBI said repos in corporate debt securities shall be for a minimum period of one day and a maximum of one year.
It said all repo trades shall be reported within 15 minutes of the trade on the reporting platform of Clearcorp Dealing Systems.
Such transactions shall be settled through the clearing houses of NSE (National Securities Clearing Corp), and BSE's Indian Clearing Corporation, and MCX-Stock Exchange's MCX-SX Clearing Corp.
It also said the security acquired under repo shall not be sold by the repo buyer (lender of the funds) during the period of repo.
