The Reserve Bank today permitted banks and other market participants to re-issue government securities with the objective of developing the term repo or money market.
"It has now been decided to permit re-repo of government securities, including state development loans and Treasury Bills, acquired under reverse repo," the RBI said in a statement. Re-repo period should not exceed the residual period of the initial repo, the statement said citing conditions for re-issue of such instrument.
Re-repo of securities can be undertaken only after receipt of confirmation of first leg of repo transaction, it added. As per the statement, banks and Primary Dealers maintaining subsidiary general ledger (SGL) account with the RBI will be permitted to re-repo the securities acquired under reverse repo.
In April 2014, the RBI had announced that it would examine the possibility of allowing limited re-repo/re-hypothecation of repoed government securities with the objective of developing the term repo/money market.
In view of the growth of repo markets during the last decade and the availability of a robust trading, clearing and settlement infrastructure with a central counter-party (CCP) guarantee, it was decided to permit re-repo of Government securities subject to appropriate control measures and development of IT infrastructure.
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