What changed
Previously, scheduled UCBs were not listed as eligible entities for ready forward contracts in corporate debt securities under the 2010 Directions. This circular adds them to the list, subject to conditions set by RBI's Urban Banks Department.
What it means for you
Scheduled UCBs gain a new liquidity management tool by being able to repo corporate debt, potentially improving their balance sheet flexibility. Banks and other market participants may see increased depth in the corporate debt repo market as UCBs enter as both borrowers and lenders.
What you must do
- Update internal eligibility lists for corporate debt repo counterparties to include scheduled UCBs.
- Ensure compliance with any conditions prescribed by RBI's Urban Banks Department for UCBs.
- Review existing repo agreements to confirm they accommodate UCBs as counterparties.
- Monitor UCB creditworthiness and operational readiness before engaging in repos with them.
Who it affects
Scheduled Urban Cooperative Banks, Scheduled commercial banks (excluding RRBs and LABs), Primary Dealers, NBFCs registered with RBI, All-India Financial Institutions (Exim Bank, NABARD, NHB, SIDBI), Mutual funds, HFCs, insurance companies (with regulator approval)
Are all UCBs eligible for corporate debt repo?
Only scheduled Urban Cooperative Banks are permitted, and they must adhere to conditions set by RBI's Urban Banks Department from time to time.
Does this circular change any other terms of the 2010 Directions?
No, all other terms and conditions from the 2010 Directions and the November 2010 circular remain unchanged.
Is this circular still in effect?
No, this circular has been superseded by the Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018 dated July 24, 2018.