RBI Proposed norms for repo deals in corporate bonds
A repo is a contract in which the seller of securities agrees to repurchase at a specified time and price.To develop the corporate bond market RBI has recently proposed Draft norms for repo deals in corporate bonds.
- Reserve Bank of India initially intends to allow repo transactions in only listed securities like non-convertible debt, debentures and bonds rated AA+ and above.
- However Commercial Papers (CPs), Certificates of Deposit (CDs) and other instruments including non-convertible debentures with less than a year of residual/original maturity, will not be eligible for repo deals.
- The Commercial banks, registered non-banking finance companies, Exim Bank, Nabard, Sidbi, mutual funds, housing finance companies and insurance companies would be eligible to enter into repo transactions.
- RBI has also proposed that repos in corporate debt securities will be permitted for a minimum period of a day and a maximum period of a year.
- The trading would be on an over-the-counter basis.