What changed
RBI added unlisted companies that have been issued special securities by the Government of India and maintain gilt accounts with scheduled commercial banks to the list of entities eligible for ready forward contracts (market repos) in government securities. These companies can only act as borrowers in the first leg of the repo, using their special securities as collateral, and must transact with a bank or primary dealer holding an SGL account with RBI.
What it means for you
Banks and primary dealers gain a new set of counterparties for repo transactions, potentially increasing liquidity in the government securities market. Lenders must ensure that unlisted companies meet the gilt account and special securities conditions before entering repos, and that the repo is structured as a borrowing for the company against those specific securities.
What you must do
- Verify that unlisted company counterparties hold special securities issued by the Government of India and maintain a gilt account with a scheduled commercial bank.
- Ensure repo transactions with such unlisted companies are structured as borrowings (first leg) against those special securities only.
- Confirm that your institution (bank or primary dealer) maintains an SGL account with RBI to act as counterparty for these repos.
- Continue to apply all conditions from the May 11, 2005 circular on ready forward contracts.
Who it affects
Scheduled commercial banks, Primary dealers, Unlisted companies with special government securities, All RBI-regulated entities dealing in government securities repos
Can unlisted companies act as lenders in repo transactions under this circular?
No, the circular restricts eligible unlisted companies to only act as borrowers of funds in the first leg of the repo contract, using their special securities as collateral.
What types of securities can unlisted companies use as collateral in these repos?
Only the special securities issued to them by the Government of India can be used as collateral for repo transactions.
Who can be the counterparty for an unlisted company in a repo transaction?
The counterparty must be either a bank or a Primary Dealer that maintains an SGL account with the Reserve Bank of India.