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RBI allows multilateral bonds for repo

Livemint:  February 04, 2015

Mumbai: The Reserve Bank of India (RBI) on Tuesday allowed bonds issued by multilateral financial institutions like World Bank Group, the Asian Development Bank and the African Development Bank in India as eligible securities for interbank borrowing.

The move will further develop the corporate bonds market, RBI said in a notification.

Only a few instruments can be used for such borrowing, known as repo. Corporate bonds up to AA rating can be used for repo transactions. Since the bonds are not at par with government bonds, corporate bonds have to take a haircut. For AAA rated corporate bonds such as that issued by World Bank Group organizations, the minimum haircut is 7.5%. For AA rated bonds, the minimum haircut is 10%.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.