What changed
RBI added T+0 settlement option for repo trades in corporate debt securities under the DvP I (gross) framework, expanding from only T+1 and T+2. The minimum haircut on market value was revised downward from a flat 25% to rating-based slabs: 10% for AAA, 12% for AA+, and 15% for AA, applicable for overnight repos or daily remargining.
What it means for you
Banks and market participants can now settle corporate debt repos on the same day, improving liquidity and operational flexibility. Lower, risk-sensitive haircuts reduce collateral costs for higher-rated securities, encouraging more repo activity in corporate bonds and deepening the corporate bond market.
What you must do
- Update repo settlement systems to support T+0 settlement for corporate debt securities.
- Revise internal haircut policies to align with the new rating-based minimums (10% AAA, 12% AA+, 15% AA).
- Ensure counterparty agreements reflect the revised haircut and settlement options before December 1, 2010.
- Train treasury and risk teams on the new DvP I framework for T+0 settlement.
Who it affects
Banks and primary dealers trading in corporate debt repos, Mutual funds and insurance companies active in repo markets, Corporate bond issuers and investors, Clearing and settlement systems for debt securities
What is the effective date for these changes?
The modifications take effect from December 1, 2010.
Are the new haircuts mandatory for all repo tenors?
The specified haircuts are minimums for overnight repos or where remargining is daily. For longer tenors or less frequent remargining, participants must apply appropriately higher haircuts.
Does this circular replace the earlier repo directions?
No, it amends the Repo in Corporate Debt Securities Directions, 2010. The entire circular was later superseded by the Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018.