Repo trades are settled on either T+0 or T+1 settlement cycle basis based on the trades received from the trading venue. Each repo trade has two legs of funds settlement i.e. ready leg and forward leg. The ready leg is settled at a discounted value computed based on interest rate and repo tenor. The forward leg consideration is the face value of the trade. Funds settlement is carried out with empaneled clearing banks. Members shall open settlement account with any one of the clearing banks for funds settlement.
Day-1: Ready leg borrowing Rs.100 crore for one day at 8% per annum. Ready leg consideration is computed as [100 / (1+ 8%*1/365)] = Rs.99.9781 crore.
Day-2: Forward leg payable is Rs.100 crore. In case where the borrower again borrows on the day of forward leg, the net settlement consideration is computed as under:
Day-2: Ready leg Borrowing of Rs.100 crore for one day at 12%. Ready leg consideration is Rs.99.9671
Settlement Obligation on Day-2: a. Forward leg payable obligation of previous ready leg: Rs.100 crore b. Current ready leg receivable obligation : Rs.99.9671 crore Settlement obligation (a-b) : Rs.0.0329 crore
Clearing banks are Axis Bank Limited, HDFC bank Limited and ICICI bank Limited