Introduction: On October 16, 2023, the Reserve Bank of India (RBI) issued a significant clarification to commercial banks regarding the reporting of Reverse Repo transactions in Form ‘A’ Return. This communication aims to bring uniformity to reporting practices and presents new guidelines for these transactions.
Detailed Analysis
1. Background: The RBI, in its Master Direction – Reserve Bank of India [Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)] Directions – 2021 (updated as of September 25, 2023), had previously outlined the reporting requirements for Reverse Repo transactions by commercial banks. This recent clarification further refines and standardizes these reporting practices.
2. Uniform Reporting: To ensure consistent reporting across all banks, the RBI has outlined a new practice for presenting Reverse Repo transactions in the Form ‘A’ Return.
A. Reverse Repo with Banks (up to 14 days): For Reverse Repo transactions with banks that have original tenors up to and inclusive of 14 days, banks should report them as follows:
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- Item III(b) of Form A (Money at call and short notice)
- Memo item 2.1 of Annex A to Form A (under Inter Bank Assets)
B. Reverse Repo with Banks (more than 14 days): For Reverse Repo transactions with banks having original tenors exceeding 14 days, banks should report them as follows:
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- Item III(c) of Form A (Advances to banks)
- Memo items 2.1 and 2.2 of Annex A to Form A (under Inter Bank Assets)
C. Reverse Repo with Non-Banks: When engaging in Reverse Repo transactions with non-banks (other institutions) regardless of tenor, these transactions should be reported under Item VI(a) of Form A (Loans, cash credits, and overdrafts under Bank Credit in India, excluding inter-bank advances).
3. Key Takeaway: This clarification is essential for commercial banks as it ensures a standardized approach to reporting Reverse Repo transactions. Compliance with these new guidelines is crucial for accurate reporting and adherence to RBI regulations.
Conclusion: The RBI’s recent clarification regarding the reporting of Reverse Repo transactions in Form ‘A’ Return is a significant step towards standardizing reporting practices among commercial banks. By categorizing Reverse Repo transactions with banks based on tenor and transactions with non-banks under specific items, the RBI aims to streamline reporting processes. Commercial banks are advised to implement these guidelines to ensure accurate and consistent reporting, as non-compliance may lead to regulatory issues. The RBI continues to uphold its commitment to transparency and efficiency in the financial sector.
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RESERVE BANK OF INDIA
RBI/2023-24/68
DoR.RET.REC.43/12.01.001/2023-24
October 16, 2023
The Chairperson / CEOs of all Commercial Banks
Madam / Dear Sir,
Reverse Repo transactions – Reporting in Form ‘A’ Return
Please refer to Form A Return in the Master Direction – Reserve Bank of India [Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)] Directions – 2021 (updated as on September 25, 2023) regarding the reporting of Reverse Repo transactions by Commercial Banks.
2. In order to bring uniformity in reporting of Reverse Repo transactions in the Form A Return by various banks, it is clarified that the banks should adhere to the following practice for presentation of Reverse Repo transactions in the above return:
A. Reverse Repo transactions with the banks should be reported as under:
i. For original tenors up to and inclusive of 14 days
a) Item III(b) of Form A (i.e. Money at call and short notice) and;
b) Memo item 2.1 of Annex A to Form A (i.e. under Inter Bank Assets)
ii. For original tenors more than 14 days
a) Item III(c) of Form A (i.e. Advances to banks) and;
b) Memo item 2.1 and 2.2 of Annex A to Form A (i.e. under Inter Bank Assets)
B. Reverse Repo transactions with non-banks (other institutions) for all tenors should be reported under Item VI(a) of Form A [i.e. Loans, cash credits and overdrafts under Bank Credit in India (excluding inter-bank advances)].
Yours faithfully,
(Brij Raj)
Chief General Manager
