RBI asks banks to treat Repo and Reverse Repo as the bought and lent securities

Delhi, India (PressExposure) November 17, 2008 -- In a serious endeavour to raise the level of transparency, Reserve Bank of India has issued a statement asking all the banking names to handle the Repo and Reverse Repo transactions in the way they treat the borrowed and lent securities. Thus, from now on all these transactions will be appearing on the Balance Sheets of the Banks.

In its statement issued last Friday, RBI laid stress on the fact that the banks should resort to an approach where the transactions between the repo sellers and the repo buyers should be exemplified in the Balance Sheet by the means of Contra entries. This new-enforced practice is a complete contrast from what it was earlier used to be where banks refused to account for them citing the cause that they are only an abstract trading item. However, this was the opinion of only a fraction of banks, a majority of them had already started practising it even before the RBI authorised it. Moreover, the securities retained under the head of repo will be treated as the liquid assets. But this is one move that has certainly received a lot of appraisal from the treasury officials of most of the banks.

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Press Release Submitted On: November 17, 2008 at 5:58 am
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