Fourth Bi-Monthly Monetary Policy Statement, 2014-15 By Dr. Raghuram G. Rajan, Governor, RBI - September 30, 2014 - Full Text
III. Financial Markets
24. As part of the Reserve Bank’s continuous engagement in broadening and deepening financial markets, it has been decided to:
allow access to the liquidity adjustment facility (LAF) to scheduled urban co-operative banks (UCBs) in order to provide them an additional avenue for liquidity management, provided they fully comply with the eligible criteria prescribed for participation in the LAF including having current accounts and SGL accounts with Reserve Bank, Mumbai, the minimum bid size prescription and the like.
Detailed guidelines will be issued separately by mid-October 2014.
25. In order to further develop the government securities market and enhance liquidity, it has been decided to:
bring down the ceiling on SLR securities under the HTM category from 24 per cent of NDTL to 22 per cent in a graduated manner i.e. 23.5 per cent with effect from the fortnight beginning January 10, 2015, 23.0 per cent with effect from the fortnight beginning April 4, 2015, 22.5 per cent with effect from the fortnight beginning July 11, 2015 and 22.0 per cent with effect from the fortnight beginning September 19, 2015.
liberalise guidelines on short sale in Government securities as under:
limit on short sale for liquid securities will be increased to 0.75 per cent of outstanding stock or `600 crore, whichever is lower (from 0.50 per cent of outstanding stock); short sale limit for illiquid securities is being retained at 0.25 per cent of the outstanding stock of securities; and
banks and primary dealers (PDs) may be permitted to take short positions in government securities in the over-the-counter (OTC) market (within the total short sale limit), subject to appropriate audit/ internal controls.
Detailed guidelines are being issued separately.
26. In April 2014, the Reserve Bank announced that it would examine the possibility of allowing limited re-repo/re-hypothecation of repoed government securities with the objective of developing the term repo/money market. In view of the growth of repo markets during the last decade and the availability of a robust trading, clearing and settlement infrastructure with a central counter-party (CCP) guarantee, it has been decided to:
permit re-repo of Government securities subject to appropriate control measures and development of IT infrastructure.
Detailed guidelines will be issued in consultation with all stakeholders by end- January 2015.
27. In order to address operational issues faced by foreign portfolio investors and long term foreign investors, it has been decided to:
provide extended reporting timings on trade date and an option for T+2 settlements for secondary market OTC trades in government securities for such investors.
Detailed guidelines in this regard would be issued by end-November 2014.
28. With a view to easing operational conditions for hedging of foreign exchange risk by market participants, it has been decided to:
increase the eligible limit for importers under the past performance route to 100 per cent from the existing 50 per cent i.e., importers can hedge up to 100 per cent of the average of past three years’ import turnover or the preceding year’s import turnover, whichever is higher, subject to compliance with other conditions applicable for hedging under this route.
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