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TREPS Explained: Tri-Party Repo and the SDF Arbitrage

3 June 20251 min read
BANKING & FINANCETREPS Explained:Tri-Party Repo andthe SDF Arbitrage3 June 2025safalsetu.com

In June 2025 banks were seen raising cheap cash in the TREPS market and placing it with RBI to earn a safe margin.

Key facts

  • TREPS rate 5.66% (weighted average) versus SDF rate 5.75%, a 9 bps gap.
  • SDF is RBI’s Standing Deposit Facility.
  • Tenor: overnight to a few weeks.

About TREPS

  • A form of repo: securities are sold with a promise to buy them back later at a fixed price including interest.
  • A third-party agent handles collateral selection, settlement, payment, custody and lifecycle.

Why mutual funds use it

  • Liquidity for idle cash with little risk.
  • A low-risk fixed-income diversifier.
  • Helps meet SEBI asset allocation norms and track exposure.

Exam angle

  • Full form: Tri-Party Repo Dealing System.
  • Related terms: repo, SDF, basis point.

Test yourself

1. In the TREPS market, which body serves as the central counterparty and the Tri-Party Agent?

The notes state CCIL fills both roles.

2. Banks earned a risk-free spread by borrowing in TREPS and parking funds in the SDF. What was the spread?

TREPS averaged 5.66% and SDF paid 5.75%, a 9 bps gap.

3. What is the usual tenor of a Tri-Party Repo Dealing System (TREPS) transaction?

TREPS is a short-term arrangement running overnight to a few weeks.

This topic is part of Daily Current Affairs 3 June 2025 (20 topics).

All topics of the dayDay quizJune 2025

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