What changed
RBI clarified that the FIMMDA Master Repo Agreement, previously required for all repo transactions, is not mandatory for Government Securities repos settled through a Central Counter Party (CCP) like CCIL. The CCP's built-in safeguards—such as haircuts, MTM pricing, margins, multilateral netting, and dispute resolution—obviate the need for a separate bilateral agreement. For Corporate Debt Securities settled bilaterally without a CCP, the FIMMDA Master Repo Agreement remains mandatory.
What it means for you
Banks and lenders can now execute repo transactions in Government Securities through CCIL without the administrative burden of a separate FIMMDA Master Repo Agreement, streamlining operations. This reduces documentation costs and legal risks for CCP-settled trades, while reinforcing the need for bilateral agreements in corporate debt repos to manage counterparty risk. The clarification ensures market participants align their repo accounting practices with the risk management framework of CCPs.
What you must do
- Update internal repo accounting policies to reflect that FIMMDA Master Repo Agreement is not required for G-Sec repos settled through CCIL.
- Ensure all bilateral repo transactions in Corporate Debt Securities continue to use the FIMMDA Master Repo Agreement as mandated.
- Review existing repo documentation to identify any unnecessary FIMMDA agreements for CCP-settled G-Sec trades and remove them.
- Train treasury and operations teams on the distinction between CCP-settled and bilateral repo documentation requirements.
Who it affects
Commercial Banks, Co-operative Banks, Primary Dealers, Financial Institutions, Regional Rural Banks, NBFCs
Is the FIMMDA Master Repo Agreement mandatory for all repo transactions?
No. It is mandatory only for repo transactions in Corporate Debt Securities settled bilaterally. For Government Securities repos settled through a CCP like CCIL, it is not mandatory due to the CCP's risk management safeguards.
What safeguards does a CCP like CCIL provide that make the FIMMDA agreement unnecessary?
CCIL provides safeguards including haircuts, mark-to-market pricing, margins, multilateral netting, closing out provisions, right to set off, settlement guarantee fund, and dispute resolution mechanisms.
Does this circular change any other terms of the earlier March 2010 circular?
No. All other terms and conditions of the March 2010 circular remain unchanged. Only the clarification on the mandatory nature of the FIMMDA Master Repo Agreement for CCP-settled G-Sec repos is provided.