Reverse repo, CBLO deal to be treated at par

India Infoline News Service | Mumbai |

The IRDA is of the view that insurers may be given flexibility to invest in reverse repo transactions or CBLO at their discretion in view of the similar safety features

The IRDA (Insurance Regulatory and Development Authority) on 4 December 2012 permitted repo / reverse repo in corporate bonds with government securities where in, an overall limit of 10% of all funds was given for reverse repo transactions for life insurers (10% limit for repo / reverse repo in case of general insurers).

In this regard, the insurance regulator is in receipt of representations from some insurers stating that limiting reverse repo transactions in G-secs to 10% of the funds would restrict the ability to generate optimal policyholder returns and therefore reverse repo transactions may be treated at par with CBLO (collateralised borrowing and lending obligation) transactions.

The IRDA is of the view that insurers may be given flexibility to invest in reverse repo transactions or CBLO at their discretion in view of the similar safety features.

Reverse repo transactions in government securities are treated at par with CBLO transactions and 10% investment limits are not applicable to reverse repo transactions in government securities in line with CBLO transactions.


 

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