Indonesia's Islamic banks launch Islamic repurchase agreement

A group of Indonesian Islamic banks launched on Thursday a standard contract template for sharia-compliant repurchase agreements, aiming to broaden the liquidity management tools available in the sector. The standard will serve as an alternative to interest-based repurchase agreements. Currently Islamic banks in Indonesia rely on tools provided by the central bank, such as an Islamic overnight deposit facility known as FASBIS, while the new agreement would standardise bank-to-bank transactions and help ensure they are cost-effective. An initial group of 18 Islamic banks and Islamic banking units are signatories to the master agreement, which allows use of government-issued Islamic bonds as collateral while tenors can be of no more than one year.