State bonds eligible collateral for Repo Funds

Mumbai, Mar 30 | Updated: Mar 31 2007, 05:56am hrs
Borrowers can use bonds sold by states as collateral to raise funds through the daily repurchase auction. The use of State Development Loans (SDLs) starting April 3 will widen the collateral base. The RBI conducts two auctions every day to help manage liquidity in the banking system. At the repurchase auction, it lends money for a short period at 7.75%, by buying bonds, while at the reverse-repurchase auction it drains money by selling bonds.