India plans introduction of triparty repo
12 April 2017 Mumbai
Image: Shutterstock
The Reserve Bank of India has set out a framework for a triparty repo market to enable participants to use underlying collateral more efficiently and facilitate the development of the term repo market in India.
The , issued on 11 April for public comment until 5 May, proposes the introduction of triparty repo on both government and corporate bonds, and sets out rules for collateral eligibility, reporting, settlement and agents.
Eligible triparty agents must have 鈥減ast experience of at least five years in the financial sector, [in] India or abroad, preferably in offering custodial services鈥�, as well as capital of at least INR 250 million (USD 3.87 million).
The introduction of a triparty repo market will be welcome news to market participants, whose securities lending business in India remains muted.
India鈥檚 National Securities Clearing Corporation cleared 77,730 securities lending trades in 2016, generating $9.23 million in lending fees. Those trades had a notional turnover of $1.79 billion.
Martin Corrall, who is on the executive board of the Pan Asia Securities Lending Association (PASLA) and group lead of a sub-working group on India, sees foreign participation as a key concern for the market.
He said : 鈥淚t鈥檚 expensive for foreign borrowers in India. Offshore entities are required to post cash as collateral with high interest rates and no rebate paid, which creates an unfair playing field, whereas domestic players are allowed to post securities.鈥�
鈥淐oncern on the Securities and Exchange Board of India鈥檚 view of overseas direct investment and limited supply due in part to the securities borrowing and lending infrastructure, has led to minimal offshore activity. Market access is concentrated on single stock futures.鈥�
The , issued on 11 April for public comment until 5 May, proposes the introduction of triparty repo on both government and corporate bonds, and sets out rules for collateral eligibility, reporting, settlement and agents.
Eligible triparty agents must have 鈥減ast experience of at least five years in the financial sector, [in] India or abroad, preferably in offering custodial services鈥�, as well as capital of at least INR 250 million (USD 3.87 million).
The introduction of a triparty repo market will be welcome news to market participants, whose securities lending business in India remains muted.
India鈥檚 National Securities Clearing Corporation cleared 77,730 securities lending trades in 2016, generating $9.23 million in lending fees. Those trades had a notional turnover of $1.79 billion.
Martin Corrall, who is on the executive board of the Pan Asia Securities Lending Association (PASLA) and group lead of a sub-working group on India, sees foreign participation as a key concern for the market.
He said : 鈥淚t鈥檚 expensive for foreign borrowers in India. Offshore entities are required to post cash as collateral with high interest rates and no rebate paid, which creates an unfair playing field, whereas domestic players are allowed to post securities.鈥�
鈥淐oncern on the Securities and Exchange Board of India鈥檚 view of overseas direct investment and limited supply due in part to the securities borrowing and lending infrastructure, has led to minimal offshore activity. Market access is concentrated on single stock futures.鈥�
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