COLLATERALIZED BORROWING AND

LENDING OBLIGATION (CBLO)

◦ Introduce in 2003, it is a money market instrument representing an obligation between a borrower and a
lender concerning the terms & conditions of a loan.

◦ It is operated by Clearing Corporation of India Ltd. (CCIL) and allow those restricted from using interbank
call money market in India to participate in the short-term money markets.

◦ In the CBLO market, financial entities can avail short term loans by providing prescribed securities as
a collateral.

◦ However, CBLO has been discontinued from November 2018 in place of which Triparty Repo
(TREPS) was introduced.
HOW A CBLO WORK?
◦ CBLO works just like a bond. Lender buys the CBLO and a borrower sells the money market instrument with interest.
◦ The maturity period ranges from one day to upto one year.
◦ Details of the CBLO include an obligation for the borrower to repay the debt at a specified future date and an authority
to the lender to receive the money on that future date.
◦ The lender has an option to transfer his authority to another person for value received.

PARTICIPANTS IN CBLO MARKET

◦ Nationalized, Private and Foreign Banks
◦ Co-Operative Banks
◦ Insurance companies, NBFC, Bank cum Primary Dealers
◦ Mutual Funds
◦ Primary Dealers, Corporate, Provident/Pension Funds
REPURCHASE AGREEMENTS (REPO)

• Repurchase Agreement or what we

commonly know as Repo is an instrument
for borrowing funds by selling securities
with an agreement to repurchase the
securities on a mutually agreed future date
at an agreed price.

• They are usually short term, from

overnight to 30 days or more than 30 days
in some cases.
 TRI-PARTY REPO
(TREPS)
Tri-party repo is a type of repo contract where
a third entity (apart from the borrower and
lender), called a Tri-Party Agent, acts as an
intermediary between the two parties to the
repo to facilitate services like collateral
selection, payment and settlement, custody and
management during the life of the transaction.
REPO RATE TRENDS
• Repo Rate means the rate at which the
central bank of a country (RBI in case of
India) lends money to the commercial banks
in the event of any shortfall of funds.

• Repo rate is used by authorities to control

inflation.

• As per current monetary policy announced

on 6th August 2021 the repo rate remains
unchanged at 4.00%
COMMERCIAL PAPER
◦ A Commercial Paper is an unsecured, short-term debt instrument issued by a corporation, typically for meeting short
term liabilities.

◦ In other terms, it is a money market instrument issued by large banks and corporations to garner money from the market
to meet short term needs.

◦ Who is eligible to issue CPs? (i) Corporates; (ii) Primary Dealers; (iii) Financial Institutions

◦ Who can invest in CPs? (i) Individuals; (ii) Banking Companies; (iii) Non-Resident Indians (NRI); (iv) Financial
Institutions

◦ NLC India, a Navratna Company under Ministry of Coal, is into coal and lignite mining and power generation. It
raised Rs. 600 crores through issuing Commercial Papers on 31st August 2021.
COMMERCIAL PAPER TRENDS