Parameters of the CBLO Market

Parameters of the CBLO Market

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The Clearing Corporation of India Ltd. (CCIL) is in charge of the money market segment operating the Collateralized Borrowing and Lending Obligation (CBLO) market. Financial institutions can obtain short-term loans on the CBLO market by offering specified securities as collateral. The CBLO market and the Call Money market are very similar in terms of how they work and what they want to achieve. The fact that lenders and borrowers use collateral for their activities makes CBLO unique. For instance, in order for lenders to grant loans, borrowers of Fund must provide collateral in the form of government securities. Under the Call Money market, collateral is not required.

Who are the members in the CBLO market? - Entities that do not have access to the inter-bank Call Money market or only have limited access are considered participants in CBLO. Still, the CBLO market is open to institutions that trade in Call Money. Primary Dealers, Bank cum Primary Dealers, NBFCs, Corporate, Provident/Pension Funds, etc., Nationalized Banks, Private Banks, Foreign Banks, Co-operative Banks, Insurance Companies, Mutual Funds, are eligible for membership in CBLO. To participate in market activities, these institutions must join CBLO.

Collateralized Borrowing and Lending Obligation (CBLO) is the instrument that makes up the CBLO market. It is a discounted instrument that can be purchased through electronic book entry for maturities of one day to one year. For market participation, the CCIL offers the Dealing System via the Indian Financial Network (INFINET) and the Negotiated Dealing System. Members of the CBLO market can lend or borrow money against the collateral of eligible securities in the market.

Securities issued by the Central Government, such as Treasury Bills and any other securities specified by the CCIL, are eligible. The CCIL must receive the required quantity of eligible securities from CBLO borrowers. The CCIL matches the members' borrowing and lending orders (order matching) for trading. The bid stipulates that borrowers must pay the lenders interest.