Date: 2016-11-25Category: Not ApplicableState: Union GovernmentCountry: India
Liquidity Adjustment Facility – Oil Marketing Companies’ Government of India Special Bonds (Oil Bonds) as eligible collateral under LAF/MSF and Removal of Margin Requirement for Reverse Repos
**Policy Summary: RBI/2016-2017/156**
**Subject:** Liquidity Adjustment Facility (LAF): Oil Marketing Companies (OMCs) Government of India Special Bonds (Oil Bonds) as eligible collateral under LAF/MSF and Removal of Margin Requirement for Reverse Repos
**Date:** November 25, 2016
**Addressees:** All Scheduled Commercial Banks (excluding RRBs), Scheduled Urban Cooperative Banks, and Standalone Primary Dealers.
**Purpose:** To announce the eligibility of Government of India-issued Oil Bonds as collateral for Repos, Reverse Repos, and Marginal Standing Facility (MSF) transactions under the Liquidity Adjustment Facility (LAF), and to remove the margin requirement for securities provided to the Reserve Bank of India (RBI) as collateral in Reverse Repo operations.
**Key Decisions:**
* Oil Bonds issued by the Government of India will be accepted as eligible securities for Repos, Reverse Repos, and MSF transactions. The E-Kuber system has been updated to reflect this change.
* The Non-SLR status of Oil Bonds remains unchanged.
* The margin requirement for securities provided by the RBI as collateral to successful participants in Reverse Repo operations, including Term Reverse Repos, has been removed.
* A margin of 4% will be applied to Oil Bonds used as collateral for Repo/MSF transactions (i.e., a Repo bid of 100 requires 104 of Oil Bonds as collateral).
**Effective Date:** These changes are effective from November 28, 2016, and will remain in effect until further notice.
**Previous Circular:** This circular refers to circular IDMD.OMO No. 0403.75.002003-04 dated March 25, 2004, regarding the Liquidity Adjustment Facility Scheme.
**Other Terms and Conditions:** All other terms and conditions for LAF/MSF remain as notified in earlier circulars.
**Contact:** Radha Shyam Ratho, Chief General Manager.
Key Entities Referenced
Liquidity Adjustment Facility: A monetary policy instrument used by the Reserve Bank of India (RBI) to manage liquidity in the banking system.
Oil Marketing Companies: Companies involved in the marketing and distribution of petroleum products.
Oil Bonds: Special bonds issued by the Government of India to Oil Marketing Companies.
Marginal Standing Facility: A facility under which scheduled commercial banks can borrow overnight funds from the Reserve Bank of India (RBI) against their government securities portfolio.
Reserve Bank of India: The central bank of India.
Scheduled Commercial Banks: Banks in India that are listed in the Second Schedule of the Reserve Bank of India Act, 1934.
Scheduled Urban Cooperative Banks: Cooperative banks in India that are scheduled under the Reserve Bank of India Act.
Radha Shyam Ratho: Chief General Manager at Reserve Bank of India.
RBI/2016-2017/156
FMOD.MAOG No. 117/01.01.001/2016-17
November 25, 2016
All Scheduled Commercial Banks (excluding RRBs)
Scheduled Urban Co-operative Banks and
Standalone Primary Dealers
Dear Sir/Madam,
Liquidity Adjustment Facility – Oil Marketing Companies’ Government of India Special
Bonds (Oil Bonds) as eligible collateral under LAF/MSF and Removal of Margin
Requirement for Reverse Repos
Please refer to our circular IDMD.OMO No. 04/03.75.00/2003-04 dated March 25, 2004 on
Liquidity Adjustment Facility Scheme.
2. It has been decided that the Oil Bonds issued by Government of India will qualify as
eligible securities for Repos, Reverse Repos and Marginal Standing Facility (MSF). The E-
Kuber system will now accept Oil Bonds as eligible collateral for the above transactions.
2.1 There will be no change in the prevailing Non-SLR status of the Oil Bonds.
3. Further, it has been decided to do away with the margin requirement for the securities
provided by Reserve Bank of India as collateral to the successful participants in Reverse
Repo operations (including Term Reverse Repos).
3.1 However, margin requirements shall continue as hitherto in respect of all Repo/MSF
transactions. A margin of 4 per cent will be applied in respect of Oil Bonds, i.e. a Repo bid of
` 100 will have to be backed by ` 104 of Oil Bonds.
4. The above stated changes will come into effect from November 28, 2016 and remain
applicable till further notice.
5. All other terms and conditions for LAF/MSF remain as notified by our earlier circulars.
Yours sincerely,
(Radha Shyam Ratho)
Chief General Manger