Collateral Requirements
Collateral requirement for Lending
The margin rates for Repo deals shall be arrived at based on Value at Risk or such other model as may be decided by Clearing Corporation from time to time and the resultant factors shall be expressed as a percentage of the face value of the repo transaction. Clearing Corporation may set different margin rates for Repo deals having different maturity periods.
The margin obligations for Repo deals of a Clearing Member shall be computed by multiplying the net position of each maturity with the corresponding margin rates as applicable for the Clearing Member and then aggregating the margin obligations.
To begin with the margin rate applicable for Lend Repo deal shall be 0.50% on the Lent amount. The collateral blocked shall be the margins applicable to the extent of net lend position for each maturity date within the each eligible security / basket as decided by Clearing Corporation from time to time.
The Collateral required for Borrowing shall be the borrowed amount plus the repo interest payable at the forward leg i.e.
- Forward leg obligation = Ready leg obligation + Repo Interest
- Repo interest = Ready Leg value * Repo tenor * Repo rate / 36500
- The repo interest shall be computed based on Actual/365 day count convention
The collateral blocked shall be to the extent of net borrowed position at the forward leg for each maturity date within the each eligible security / basket as decided by Clearing Corporation from time to time.
- The securities deposited by the Clearing Member towards collateral contribution shall be subjected to daily valuation;
- In the event of net value of such securities, falling short of the outstanding borrowing position of the Clearing Member, Clearing Corporation shall make a margin call on such Clearing Members ;
- Clearing Corporation may require Clearing Member to provide additional collaterals, in case of a sudden increase in volatility of interest rates/ securities prices or downgrade of securities rating. This may be done by an increase in the haircut for a specified security/(ies) The additional collateral shall be subject to:
- Outstanding position of a Clearing Member; and/ or
- Securities contribution to Collateral;
- Clearing Corporation may impose such additional collateral requirement at any time during the day. As such, the Collateral balance of the Clearing Members may be reduced to the extent of increase in the hair cut in respect of their outstanding positions
- Upon changes in haircut, if it is observed that the Collateral balance of a Clearing Member is inadequate to cover the requirements on account of existing borrowing / lending by the Clearing Member, it shall be the responsibility of the said Clearing Member to replenish the shortfall as directed by Clearing Corporation.
- Failure of the Clearing Member to provide additional collateral shall be treated as a violation and shall be dealt with accordingly.
- Clearing Members with forward leg borrow payable positions are permitted to provide Early Pay-in of funds. However, this facility is available only on the settlement day.
- Early Pay-in of Funds shall be provided through the Collateral Interface for Member (CIM).
- On successful confirmation by the Clearing Banks on availability of funds, the blocked collateral of the Clearing Member shall be freed up to the extent of early payin received
- Rollover can be done on the forward leg settlement day for the original borrow positions payable.
- Rollover can be done for the tenor which may be same or different from the original transaction.
- Collateral shall remain blocked till the settlement of forward leg of the rollover position. iv. In case if the rollover order requires any additional collaterals, then such order shall only be accepted if additional collaterals are available.
Updated on: 04/01/2023
