Reserve Bank of India (Government Securities Lending) Directions, 2023
UR
- Applies toBanks and other entities RBI allows to lend or borrow government bonds (securities lending)
- StatusIn force
- IssuedDec 27, 2023
- Amendmentsnone tracked
- Length40 points in 3 sections · 4 min read
The four dates on this rule
- PublishedDec 27, 2023The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyDecember 27, 2023The day this rule starts to apply, as RBI's own text states it.
- Time to get readyNoneIt starts to apply on the day it was published.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Must know
1. Covers OTC bond-lending deals
It covers government bond lending deals done over the counter.
2. Government bonds eligible to lend
You can lend central government bonds, but not Treasury Bills.
3. Repo bonds also eligible
Bonds you got through a repo or an earlier GSL deal can be lent again.
4. Bonds eligible as collateral
Central, State and Treasury Bill bonds can all be used as collateral.
5. Repo-eligible entities can lend
Any entity allowed to do repo deals can lend bonds under this rule.
6. Short-sellers can borrow bonds
Only entities allowed to short-sell may borrow bonds this way.
7. Minimum tenor is one day
A GSL deal must run for at least one day.
8. Maximum tenor matches short-sale cap
The longest a GSL deal can run matches the cap for short-sale deals.
9. Settlement is bond for bond
Every GSL deal settles bond-for-bond, both sides at once.
10. Settles next day at latest
The first leg settles the same day or the next day.
11. Settles through CCIL
GSL deals settle through CCIL or another body RBI approves.
12. Collateral priced at market rate
Collateral is priced openly at the market rate when the deal starts.
13. Haircut set by clearing house
The haircut is fixed by the central counterparty handling the deal.
14. Borrowed bonds can be resold
A borrowed bond can be resold outright or put into another deal.
15. Or used in RBI's facility
A borrowed bond can also be used in RBI's own liquidity facility.
16. Or relent or re-pledged
A borrowed bond can be lent again or pledged as collateral elsewhere.
17. Collateral can be swapped
Collateral can be swapped for another bond under the clearing rules.
18. Report trades within 15 minutes
Every GSL trade must be reported within 15 minutes.
19. Flag any misreporting at once
Wrong or double reporting must be flagged to CCIL at once.
20. Must answer RBI's questions
RBI can ask for any information and must get an answer in time.
21. Regulated entities follow Annex rules
An RBI-regulated entity must book a GSL deal the way the Annex says.
22. Borrowed bond counts for SLR
A borrowed bond counts toward the borrower's SLR requirement.
23. Lent bond stops counting
A lent bond stops counting toward the lender's SLR requirement.
24. Collateral received counts for SLR
Collateral received counts toward the lender's SLR requirement.
25. Collateral placed stops counting
Collateral placed stops counting toward the borrower's SLR requirement.
26. Sign the standard master agreement
Both sides sign the market body's standard master agreement.
27. Suspension up to one month
Breaking this rule can mean a one-month ban from GSL deals.
Background
1. Called the 2023 Directions
This rulebook is the 2023 Directions for lending and borrowing government bonds.
2. Started 27 December 2023
The rule started on 27 December 2023.
3. What a Central Counterparty is
A Central Counterparty sits between both sides and becomes each one's buyer and seller.
4. What Delivery versus Delivery means
Under Delivery versus Delivery, both sides hand over their bonds at the same time.
5. What a GSL deal is
In a GSL deal, you lend your bonds for a fee against other bonds as security.
6. What the GSL fee is
The GSL fee is what the borrower pays the lender, as they agree.
7. What OTC markets means
OTC markets are any deals not done on a stock exchange, including on ETPs.
8. RBI can add lenders
RBI can name other entities as lenders later.
9. Trading process is flexible
Both sides can agree on how the deal is arranged and matched.
10. RBI may publish anonymised data
RBI may publish anonymised data about GSL deals.
11. Others use normal accounting
Any other participant follows the usual accounting standards instead.
12. ETP deals follow platform rules
A deal traded on an ETP follows that platform's own rules.
13. RBI can name and shame
RBI can also make the ban public.