With reference to the RBI's updated Master Direction on Repurchase Transactions (Repo) Directions, 2025, consider the following statements:
1. Municipal debt securities are now permitted as eligible collateral for repo transactions.
2. Municipal bonds pledged as collateral in repo transactions are subject to a minimum haircut of 2%.
Which of the statements given above is/are correct?

Question

Accepted Answer

C) Both 1 and 2 — The RBI's November 2025 Master Direction officially includes municipal debt securities as eligible collateral for repo transactions (Statement 1 is correct) and mandates a minimum haircut of 2% for these local authority securities to mitigate market risk (Statement 2 is correct).

Municipal Bonds Permitted in RBI Repo Transactions

20th G20 Leaders' Summit in Johannesburg