Mumbai: The markets regulator Sebi on Wednesday asked all stock exchanges to amend the rules to enable foreign institutional investors (FIIs) to offer domestic and foreign government securities as collateral for cash segment transactions.
As per Sebi regulations, FIIs are required to post collaterals for their transactions in the cash segment. So far, FIIs have been allowed to offer cash and AAA-rated foreign sovereign securities as collateral only for the derivatives segment.
Sebi directive follows an order by the Reserve Bank of India (RBI) earlier this month, which allowed FIIs to offer these securities as collateral for cash segment as well.
The Sebi asked all bourses to “make necessary amendments to the relevant by-laws, rules and regulations for the implementation of the decision.”
RBI had said, “it has been decided to permit FIIs to offer domestic government securities (the current limit being $5 billion), and foreign sovereign securities with AAA rating, as collateral to the recognized stock exchanges in the country in addition to cash, for their transactions in the cash segment.”
It had said, however, that cross margining of government securities (placed as margins by FIIs for their transactions in the cash segment of the market) will not be allowed between the cash and the derivative segments.
As per the RBI data, FII investments in treasury bills and other instruments, have risen from Rs1,732 crore in 2006-07 to Rs10,522 crore in 2008-09.