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Repo market opened to NBFCs, mutual funds

Mumbai, Feb. 21: The Reserve Bank of India has decided to open up the ready forward (repo) market to non-banking players like mutual funds, insurance, housing finance and non-banking financial companies and other scheduled banks.

The RBI today said it has extended the eligibility in ready forward contracts in government securities, including treasury bills with effect from March 3.

“The RBI has now permitted certain other entities to enter into repos in government securities, including treasury bills. To be operationalised from March 3, this facility will be available to any scheduled bank, primary dealer, non-banking financial company registered with the Reserve Bank of India (other than the government companies as defined in section 617 of the Companies Act, 1956), any mutual fund registered with the Securities and Exchange Board of India, any housing finance company registered with the National Housing Bank and any insurance company registered with the Insurance Regulatory Development Authority,” the apex bank said in a statement.

According to the RBI, these entities will be able to enter into ready forward contracts through their gilt accounts maintained with the custodians under the constituent subsidiary general ledger (CSGL) facility.

While announcing participation of other entities in repo market, the Reserve Bank clarified that repo contracts between CSGL account holders will be subject to certain restrictions.

As per these restrictions, a SGL account holder cannot enter into a ready forward contract with its own constituent (with any person or entity maintaining gilt account with itself).

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