Economics • Banking & FinanceHard
Analyze the role of the 'Collateralized Borrowing and Obligation Repo (CBLO)' segment, now replaced by Tri-Party Repo, in the Indian money market. What defines its core operational structure?
A. Unsecured interbank loans transacted overnight without any underlying asset backing
B. A repo market where a third-party agent acts as an intermediary between borrowers and lenders of funds against government securities✓ Correct Answer
C. Foreign exchange swap agreements executed between domestic commercial banks and international financial institutions
D. Long-term corporate bond issuances traded exclusively among institutional mutual fund managers
💡 Solution & Explanation
Tri-Party Repo is a repo contract where a third-party custodian or clearing corporation handles the administration of collateral, margining, and settlement between the borrowing and lending entities. This structure broadens market participation by allowing non-bank financial institutions, mutual funds, and insurance companies to lend securely. The Clearing Corporation of India Limited operates this platform within the domestic financial market.
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