Tri-party repo

Indian Economy glossary

Also called: TREPS, Triparty Repo Dealing and Settlement · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT

Meaning

A repo is a way to borrow money by handing over securities, with a promise to buy them back later. A tri-party repo adds a third party that handles the collateral (the securities given as security), values it and settles the deal. This makes borrowing and lending safer and simpler for both sides. In India, the third party is CCIL (Clearing Corporation of India), and the platform is called TREPS (Tri-party Repo Dealing and Settlement).

Example

A mutual fund with spare cash for one day can lend it through TREPS to a bank that needs cash. The bank gives G-secs as collateral, and CCIL holds and values them. TREPS replaced CBLO in November 2018 and is now the largest segment of India's money market.

Don't confuse with

  • RBI's LAF repo: under the Liquidity Adjustment Facility (LAF), RBI itself is the other party in the deal. In TREPS, market players such as banks and mutual funds lend to each other.
  • Call money: call money is unsecured lending between banks. A tri-party repo is backed by collateral.

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