RBI Act may be amended to redefine ‘repo’, ‘reverse repo’

Posted: Tuesday, Jan 31, 2006 at 0000 hrs IST
Updated: Tuesday, Jan 31, 2006 at 0000 hrs IST

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New Delhi, Jan 30: The finance ministry is likely to amend the RBI Act in the coming Parliament session by reworking the definition of “repo” and “reverse repo” envisaged in the Act.

The definition would be changed in a manner to facilitate the market participants or the banks in the transaction exercise. That apart, the government also wants to enable the apex bank to regulate trading of over-the-counter derivatives through the amendment of the Act.

Reverse repo rate signifies the rate at which the central bank absorbs liquidity from the banks, while repo signifies the rate at which liquidity is injected. Official sources said that the definition would be changed in order to make it more convenient for the banks. The rates are determined by the central bank.

It is learnt that the parliamentary standing committee has already approved it.

“We would take up the amendment of the Act in the coming session itself,” a senior government official said, adding that this could also be part of the Budget announcements.

Meanwhile, the standing committee on finance is yet to submit its report on the proposed amendments of the the critical Banking Companies Amendment Act, though the other two Bills proposing the amendment of the SBI Act and Banking Regulation Act are ready and the government plans to table them in the coming session.

Though finance minister P Chidambaram has said that the reforms in the banking sector would be taken forward, the trade unions have threatened to go on nationwide strike in case the government went ahead with the reforms. Trade Unions would observe a nationwide strike on March 8 to protest against the government moves. They have also threatened to intensify their agitation depending on the budget announcements.

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