Economics • Banking & FinanceMedium
What is the primary operational purpose of introducing the 'Tri-Party Repo (TREPS)' in the Indian money market?
A. To facilitate direct retail investment in government securities.
B. To provide a transparent mechanism for borrowing and lending funds against securities with a third party acting as a central counterparty.✓ Correct Answer
C. To enable foreign institutional investors to trade in corporate bonds without RBI approval.
D. To manage foreign exchange reserves through tripartite currency swaps.
💡 Solution & Explanation
Tri-Party Repo provides a transparent mechanism for borrowing and lending funds against securities with a third party, specifically the Clearing Corporation of India Ltd, acting as a central counterparty to manage settlement risk. It does not facilitate direct retail investment or foreign exchange reserves management. Money market instruments are crucial concepts in Indian economy syllabi.
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