What changed
Previously, only sale of G-Sec already contracted for purchase was permitted, and the forward leg of a repo was treated as a purchase contract. Now, RBI has extended the flexibility to repo G-Sec that have already been contracted for sale on T+1 basis, as long as settlement obligations are met.
What it means for you
This circular gives market participants more operational flexibility in managing G-Sec positions by allowing repo transactions on securities already sold forward. Banks and primary dealers can now optimize liquidity and collateral more efficiently, but must ensure sufficient balances in SGL/CSGL accounts to avoid penal action for settlement failure.
What you must do
- Update internal treasury and settlement systems to handle repo of G-Sec already contracted for sale.
- Ensure adequate SGL/CSGL balances are maintained to settle both the sale and repo forward leg on the same settlement date.
- Review and communicate the revised guidelines to dealing and back-office teams to avoid settlement failures.
- Monitor compliance with penal provisions outlined in circular IDMD.DOD.17/11.01.01(B)/2010-11 for any settlement defaults.
Who it affects
All market participants dealing in government securities, Banks and primary dealers, Treasury and settlement operations teams
Can we repo a G-Sec that we have already sold on T+1 basis?
Yes, RBI now permits repo of such G-Sec on T+0 basis, provided you have adequate SGL/CSGL balances to settle both transactions on the settlement date.
What happens if we fail to settle these transactions?
Any settlement failure will attract penal provisions as per circular IDMD.DOD.17/11.01.01(B)/2010-11 dated July 14, 2010.