What changed
RBI issued clarifications on repo transactions in corporate debt securities for NBFCs-ND-SI. Eligible participants are limited to NBFCs-ND with asset size of Rs. 100 crore and above. Risk weights for credit and counterparty credit risk follow existing prudential norms. Balance classification in repo/reverse repo accounts must be done in relevant schedules similar to banks.
What it means for you
NBFCs-ND-SI can now engage in repo transactions in corporate debt securities, but must adhere strictly to IDMD directions and accounting guidelines. This opens a new liquidity management tool for large NBFCs, but requires careful compliance with risk weight and accounting norms. Banks dealing with these NBFCs should ensure counterparties meet eligibility criteria.
What you must do
- Verify that your NBFC-ND has asset size of Rs. 100 crore and above before participating in repo transactions.
- Comply with IDMD's Repo in Corporate Debt Securities Directions, 2010 and revised accounting guidelines of March 23, 2010.
- Apply risk weights for credit risk on collateral and counterparty credit risk as per NBFC prudential norms.
- Classify repo/reverse repo balances in schedules similar to bank accounting standards.
Who it affects
NBFCs-ND with asset size of Rs. 100 crore and above (NBFCs-ND-SI), Banks and financial institutions dealing with NBFCs in repo transactions, RBI's IDMD and supervisory teams
Which NBFCs are eligible for repo in corporate debt securities?
Only NBFCs-ND with asset size of Rs. 100 crore and above, i.e., NBFCs-ND-SI, are eligible as per this circular.
What risk weights apply to these repo transactions?
Risk weights for credit risk on collateral and counterparty credit risk follow the NBFC prudential norms directions, as applicable to the issuer or counterparty.
Do NBFCs need to follow any specific accounting for repo transactions?
Yes, NBFCs must follow IDMD's revised guidelines on uniform accounting for repo/reverse repo transactions issued on March 23, 2010, and classify balances in relevant schedules similar to banks.