The government has allowed 19 entities, including mutual funds, financial institutions and insurance companies, to enter into reverse repo transaction with banks and primary dealers in treasury bills of all maturities and dated securities.
The RBI has specified that the reverse repo transactions have to be effected at Mumbai. At present, these entities are allowed to lend in the inter-bank money market but not allowed to borrow. While they can enter into a reverse repo transaction, they are, however, not allowed to enter into repo transactions for this would be construed as borrowing from the call market.
The first leg of the transaction by these entities would be by way of purchase of securities from the banks and primary dealers and the second leg would be by way of selling back.
The reverse repo facility allows these entities the use of an additional instrument. However, the RBIs move can be part of the steps taken by it to activate the repos and reverse repos market.
The 19 non-bank entities allowed the facility are: Canbank Mutual Fund, ECGCI, Ltd, Exim Basnk, GIC, GIC Mutual Fund, IndBank Mutual Fund, ICICI Ltd, IDBI , IDBI Mutual Fund, ITC Threadneedle Mutual Fund, LIC, Nabard, NHB, New India Assurance Co Ltd, Oriental Insurance Co Ltd, Reliance Capital Mutual Fund, SBI Mutual Fund, Sidbi and UTI.
