RBI Issues Final Guidelines For Tri-Party Repo Transactions
Tri-party repo may be transacted over the counter, RBI says
The Reserve Bank of India on Thursday issued final guidelines on tri-party repo transactions as part of its attempt to develop financial market in India.
The central bank, in its guidelines, said that tri-party repo may be traded over-the-counter (OTC) including on electronic platforms, or on stock exchanges.
Tri-party repo is a type of repo contract where a third entity (apart from the borrower and lender), called a Tri-Party Agent, acts as an intermediary between the two parties to the repo to facilitate services like collateral selection, payment and settlement, custody and management during the life of the transaction.RBI’s Definition Of Tri-Party Repo
Here are the highlights of the RBI’s guidelines:
1. Tri-party repo may be traded using any trading process authorised under these directions by the RBI, including bilateral or multilateral, anonymous or otherwise, quote driven or order driven.
2. All tri-party agents will require authorisation from the RBI.
3. Scheduled commercial banks, recognised stock exchanges and clearing corporations of stock exchanges or clearing corporations authorised under Payment and Settlement Systems Act., are eligible to be triparty agents.
4. Other entities regulated by the RBI and the Securities and Exchanges Board of India (SEBI) would be eligible to apply to become tri-party agents, if they are permitted by the concerned regulator to do so and if there has been no punitive action against the entity for at least five years.
5. The applicant should have minimum paid-up equity share capital of Rs 25 crore which should be maintained at all times. The foreign shareholding, if any, of the applicant entity would be as per the extant foreign investment policy.
6. The applicant should have past experience of at least five years in the financial sector, in India or abroad, preferably in custody, clearing or settlement services. These agents would be required to put in place the infrastructure necessary for carrying out their function.
7. If an authorised Tri-Party agent intends to terminate operations, it should abide by the timing and date of termination of Tri-Party operations, and any other condition stipulated by the Reserve Bank.
The RBI had issued the draft guidelines on April 11, 2017 and said in its August 2 policy that it would issue final guidelines shortly. The draft guidelines were issued after recommendations from a committee headed by former deputy governor HR Khan in August 2016.