Can a simple financial tool help mutual funds maximise returns and manage risk? To achieve these, mutual funds employ various tools; one such tool is TREPS, which allows mutual funds to manage liquidity, enhance returns, and optimize portfolio performance. TREPS offers a secure and efficient way to sell or buy funds on a short-term basis with the support of government securities. This article will explore how TREPS works, its benefits, and why it is an efficient tool for mutual funds.
TREPS, or Treasury Bills Repurchase, is a short-term market instrument designed to help investors earn returns on idle funds. Banks, financial institutions, and mutual funds widely use it to generate higher returns.
A transaction under TREPS will be a sale of Treasury Bills by one party to another party with an agreement to repurchase them at a future specified price and date. This transaction remains backed by government assets and is considered a low-risk investment.
Suppose a mutual fund has more idle cash and is looking to invest quickly. Instead of letting the money remain idle, the mutual fund could use TREPS to earn interest returns while maintaining liquidity.
If a mutual fund needs a large amount of cash quickly due to sudden withdrawals, it can use TREPS instead of selling its long-term assets at a loss. Since TREPS investments are backed by government securities, they are considered risk-free.
TREPS also helps mutual funds diversify their portfolios and reduce reliance on a single investment type, making their financial strategy stronger. To ensure stability, SEBI requires mutual funds to invest at least 5% of their total liquid assets in TREPS.
Among mutual fund investors, TREPS gives the edge over other options to balance safety, liquidity, and returns. Some of the benefits of investing involve:
The returns of TREPS movement are related to the immediate price movement of the market. Investors will likely earn the maximum return from their idle cash when the interest rates are high.
SEBI regulation has directed that mutual funds set a part of their liquid assets into TREPS. This regulation is to reassure the investors of the safety and compliance framework.
Fast liquidity is one of the essential features of TREPS, which helps mutual funds to quickly access cash to meet redemption requests, buy or sell assets, or handle other financial needs within a short time.
Diversifying a mutual fund's portfolio helps reduce overall risk and ensures stability during market fluctuations. TREPS contributes to this by creating a balanced portfolio, offering protection against potential risks.
TREPS offers mutual funds a place for higher returns, improving the overall portfolio and assuring asset protection. Planning your investment is necessary, but choosing reliable platforms becomes equally important.
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Yes, TREPS (Triparty Repo) is considered good for mutual funds, especially liquid and overnight funds. They provide a safe and effective short-term investment avenue.
It helps fund managers earn modest returns on surplus cash while maintaining liquidity and low risk. Since TREPS transactions are backed by collateral such as government securities, they offer security and help to optimise idle funds.
TREPS stands for Triparty Repo Dealing and Settlement System. It is a short-term money market instrument that allows mutual funds and other market participants to lend or borrow money overnight against collateral. The system is managed by the Clearing Corporation of India Ltd (CCIL) to ensure transparency and safety in repo transactions.
Mutual funds, Banks, Insurance companies, and Pension funds can participate in TREPS. Non-banking financial companies (NBFCs), primary dealers, and corporate treasuries can also take part.
Any RBI or SEBI-regulated entity that needs a secure short-term investment or liquidity management tool can use TREPS.
TREPS transactions do not affect share prices directly, as they are part of the money market and not the stock market. TREPS participants lend and borrow cash overnight using government securities as collateral.
However, if mutual funds efficiently use TREPS, then they can contribute to better fund management and stable NAVs.
TREPS allows mutual funds to keep excess cash securely and earn returns on it. Doing so reduces reliance on traditional debt instruments. TREPS doesn’t add diversification in asset classes; it just enhances liquidity management and risk control.
Mutual funds invest in TREPS mainly for short-term liquidity management and capital preservation. They use TREPS because they are backed by government securities, offer overnight maturity, and are a SEBI-approved tool to deploy idle cash. They are better than cash or bank deposits.
TREPS can slightly influence the NAV (Net Asset Value) of mutual funds, especially those that invest in them regularly. TREPS earn modest overnight interest, so they subsidise slightly to everyday NAV growth in liquid and debt funds. However, the impact is minor and generally serves to even out NAV fluctuations, not drive major gains.
TREPS can affect the NAV (Net Asset Value) of mutual funds, especially those that invest in them regularly. However, they are not related to equities, so they can’t affect stock prices.
TREPS is primarily used by overnight funds, liquid, ultra-short-term debt, and money market funds. Other debt-oriented hybrid funds also use it for surplus cash management.
Equity funds may also briefly park idle cash in TREPS for liquidity, but their exposure is characteristically limited.
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01 September 2025
3 mins read
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