Repo, TREPS and Call Money for the CTP Exam
Unsecured overnight money, secured repo, and CCIL's tri-party segment. The definitions RBI writes, and the interest sums behind them.
A bank treasury balances its rupee position every single day. It borrows when it is short and lends when it has surplus, and the money market is where both happen. The main tools are call, notice and term money, which are unsecured, and repo, which is secured against government securities. TREPS is the repo segment run by CCIL, and certificates of deposit and IBPCs complete the set.
For the Certified Treasury Professional exam, Module II tests two things: the definitions, which RBI writes very precisely, and the arithmetic of a repo, which is simple interest on an Actual/365 basis. This page covers both, with worked numbers you can repeat on the basic 8-function calculator the exam allows.
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Call, Notice and Term Money: The RBI Definitions
From RBI's Call, Notice and Term Money Markets Directions, 2021. All three are borrowing or lending of unsecured funds.
Call money
Tenor
Overnight
Can it end early?
Normally not cancelled
Notice money
Tenor
Up to and including 14 days, excluding overnight
Can it end early?
Can be terminated before maturity at a mutually agreed price
Term money
Tenor
More than 14 days and up to one year
Can it end early?
Can be terminated before maturity at a mutually agreed price
| Segment | Tenor | Can it end early? |
|---|---|---|
| Call money | Overnight | Normally not cancelled |
| Notice money | Up to and including 14 days, excluding overnight | Can be terminated before maturity at a mutually agreed price |
| Term money | More than 14 days and up to one year | Can be terminated before maturity at a mutually agreed price |
Who Can Deal, and How
- check_circleParticipants, both as borrowers and lenders: scheduled commercial banks (excluding Local Area Banks), payment banks, small finance banks, regional rural banks, co-operative banks (state, district central and urban) and primary dealers. Mutual funds, insurers and corporates are not on the list.
- check_circleInterest rates are free. Participants decide them.
- check_circleDeals are done over the counter, including on NDS-CALL, RBI's electronic platform for this market, between 9:00 AM and 5:00 PM on business days.
- check_circleA deal not done on NDS-CALL must be reported there within 15 minutes of execution by both parties. A cancellation or early termination is also reported within 15 minutes.
- check_circleMarket practices and documentation follow FIMMDA.
Borrowing Limits by Participant
Prudential limits on outstanding borrowing (Table 1 of the Directions, as updated on June 08, 2023). Lending limits are set by each participant's Board.
| Participant | Limit on outstanding borrowing |
|---|---|
| Scheduled commercial banks | Board-approved limits within the inter-bank liability limits set by RBI's Department of Regulation |
| Small finance banks | Call and notice: 100% of capital funds on a fortnightly daily average, and 125% on any day. Term: Board limit within inter-bank liability limits |
| Payment banks and RRBs | Call, notice and term: 100% of capital funds on a fortnightly daily average, and 125% on any day |
| Co-operative banks | 2.0% of aggregate deposits at the end of the previous financial year |
| Primary dealers | 225% of Net Owned Fund at the end of the previous financial year (call and notice on a fortnightly daily average) |
Repo and Reverse Repo
As RBI's G-Sec market primer defines them.
- Repo
- Borrowing funds by selling securities, with an agreement to buy them back on an agreed future date at an agreed price that includes interest. The borrower does the repo.
- Reverse repo
- The same deal seen from the lender's side: lending funds by buying securities, with an agreement to sell them back. The lender does the reverse repo.
- First leg and second leg
- The first leg is the sale (cash goes to the borrower). The second leg is the buyback (cash plus interest comes back). The time between them is the repo period.
- Repo rate
- The return on a repo, expressed as an annual interest rate. Interest is calculated on the first-leg amount and paid with the second leg.
- LAF
- The Liquidity Adjustment Facility: RBI's own repos and reverse repos with banks and primary dealers, overnight, against G-Secs, at a rate RBI fixes. It is a tool of monetary policy and day-to-day liquidity management.
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Worked Example: An Overnight Market Repo
Illustrative numbers. Bank A is short of funds and does a repo with Bank B at 6.50% for one day. The money market counts days on an Actual/365 basis.
- 1
First leg
Bank A sells G-Secs to Bank B and receives ₹10,00,00,000.
- 2
Interest for one day
₹10,00,00,000 × 6.50% × 1 / 365 = ₹17,808.22.
- 3
Second leg
Bank A buys the securities back for ₹10,00,00,000 + ₹17,808.22 = ₹10,00,17,808.22.
- 4
Over a weekend
If the first leg is on a Friday and the second on Monday, the repo runs 3 days: ₹10,00,00,000 × 6.50% × 3 / 365 = ₹53,424.66. Count actual days, not business days.
TREPS: Tri-Party Repo Through CCIL
In a tri-party repo, a third entity, the tri-party agent, sits between borrower and lender and handles collateral selection, payment, settlement and custody. In India, CCIL is both the tri-party agent and the central counterparty to every trade on TREPS, the Tri-Party Repo Dealing System run by Clearcorp Dealing Systems. Deals are matched anonymously, so neither side carries the other's credit risk.
TREPS was introduced in July 2018 and replaced CBLO (Collateralised Borrowing and Lending Obligation), which was phased out by November 2018. The syllabus still names CBLO, so expect it in questions as the older product TREPS replaced. Unlike call money, TREPS is open to all repo-eligible entities, including mutual funds, insurers, NBFCs and corporates.
TREPS at a Glance
From CCIL's Tri-Party Repo FAQs.
| Feature | Detail |
|---|---|
| Tenors | Up to the next 7 days and three month-end dates; a member can request any tenor up to 365 days |
| Settlement | T+0 or T+1 |
| Lot size | Minimum and multiple of ₹5 lakh |
| TREP ID | Names the second-leg repayment date. TREP010119 is repaid on 1 January 2019 |
| Initial margin | Minimum ₹1 lakh in cash, plus margin at the rate CCIL notifies on traded and outstanding orders |
| CRR and SLR | No CRR on TREPS borrowings. The lender may count securities received towards SLR if they are SLR-eligible |
Worked Example: TREPS First-Leg Amount
TREPS works backwards from the repayment amount. CCIL's formula: first leg = second leg / (1 + (rate / 36500) × days). Illustrative numbers.
- 1
The deal
A member lends so that ₹10,00,00,000 comes back tomorrow, at 6.40% for 1 day.
- 2
Divisor
6.40 / 36500 × 1 = 0.00017534. Add 1: 1.00017534.
- 3
First leg
₹10,00,00,000 / 1.00017534 = ₹9,99,82,468.83 paid out today.
- 4
Interest
₹10,00,00,000 − ₹9,99,82,468.83 = ₹17,531.17. Check: ₹9,99,82,468.83 × 6.40% / 365 gives the same ₹17,531.17.
Certificates of Deposit and IBPCs
What it is
Certificate of Deposit (CD)
Negotiable, unsecured usance promissory note issued by a bank against funds deposited
Inter-Bank Participation Certificate (IBPC)
A certificate by which one bank shares a portion of its advances with another bank
Who issues
Certificate of Deposit (CD)
Scheduled commercial banks, RRBs and small finance banks
Inter-Bank Participation Certificate (IBPC)
Scheduled commercial banks under RBI's 1988 scheme; since 2009 RRBs too, to scheduled commercial banks
Tenor
Certificate of Deposit (CD)
7 days to one year at issue
Inter-Bank Participation Certificate (IBPC)
RRB IBPCs: 180 days, on a risk sharing basis, against priority sector advances above 60% of outstanding advances
Other rules
Certificate of Deposit (CD)
Minimum ₹5 lakh and multiples of ₹5 lakh; demat only; issued at a discount or at a fixed or floating rate; open to all residents; buyback allowed only 7 days after issue, at market price, offered to all holders
Inter-Bank Participation Certificate (IBPC)
Moves assets between banks without a sale of the loan
| Point | Certificate of Deposit (CD) | Inter-Bank Participation Certificate (IBPC) |
|---|---|---|
| What it is | Negotiable, unsecured usance promissory note issued by a bank against funds deposited | A certificate by which one bank shares a portion of its advances with another bank |
| Who issues | Scheduled commercial banks, RRBs and small finance banks | Scheduled commercial banks under RBI's 1988 scheme; since 2009 RRBs too, to scheduled commercial banks |
| Tenor | 7 days to one year at issue | RRB IBPCs: 180 days, on a risk sharing basis, against priority sector advances above 60% of outstanding advances |
| Other rules | Minimum ₹5 lakh and multiples of ₹5 lakh; demat only; issued at a discount or at a fixed or floating rate; open to all residents; buyback allowed only 7 days after issue, at market price, offered to all holders | Moves assets between banks without a sale of the loan |
How the CTP Exam Tests This
- check_circleTenor boundaries. Call is overnight. 14 days is still notice money. 15 days is term money. Term money stops at one year.
- check_circleSecured or not. Call, notice and term money are unsecured. Repo and TREPS are secured by securities.
- check_circleWho is in. Mutual funds and corporates cannot borrow call money, but they can use TREPS.
- check_circleDirection. The borrower does a repo; the lender does a reverse repo. In LAF, RBI is the counterparty to every deal.
- check_circleArithmetic. Interest = amount × rate × days / 365 for money market deals. For TREPS, divide the second leg by (1 + rate/36500 × days).
- check_circleCBLO. It was replaced by TREPS in 2018. An option describing CBLO as the current product is out of date.
FAQs
What is the difference between call, notice and term money?expand_more
Only the tenor. Call money is overnight. Notice money runs up to and including 14 days, excluding overnight. Term money runs beyond 14 days and up to one year. All three are unsecured.
What is the difference between repo and reverse repo?expand_more
They are the two sides of one deal. The party selling securities and borrowing cash does a repo. The party buying the securities and lending cash does a reverse repo.
What is TREPS and what did it replace?expand_more
TREPS is the Tri-Party Repo Dealing System, where CCIL acts as tri-party agent and central counterparty. It was introduced in July 2018 and replaced CBLO, which was phased out by November 2018.
Which day count is used for repo interest?expand_more
The money market uses Actual/365, per RBI's G-Sec primer. CCIL's TREPS formula builds this in: interest rate divided by 36500, multiplied by the number of days.
What is the minimum size of a certificate of deposit?expand_more
₹5 lakh, and multiples of ₹5 lakh after that. The tenor at issue must be at least 7 days and at most one year.
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