According to the working group, there ought to be a `standard repo contract', governing transactions which should make a provision for conflicting issues like interest-rate risk, if yield towards maturity of the security sold during repo transaction changes and defaults. "Currently, there is no provision that takes care of defaults occuring during the course of the transaction by either party," sources said.

However, the Reserve Bank has, through its various circulars and notifications, given a much-needed boost to the repo market. According to the central bank's rules, repo can be conducted only through SGL securities in Mumbai. Primary dealers, banks, satellite dealers, banks and the Reserve Bank can only take part.

In thecountry, repo is done via `acceptance-cum-deal confirmation system'. According to the system, the security to be sold at the time of repo is notionally valued based on market perception and an agreement is signed between the two parties.

"Currently, there is no standard that is followed during the course of repo transaction," sources said.

According to sources, during the course of repo transaction, there is no mechanism that deals with `how to resolve disputes or prevent it'. ``Though standard form of systems are in vogue in other countries, we don't have any standard format to deal with unforseen circumstances like disputes,'' a source said.

Market sources say a dispute can easily arise between the parties involved in repo transaction, if the price of security goes up or falls. For instance, "If A and B have struck a deal for a three-day repo, and if the price of the security involved in the transaction crash, under such circumstances if A is not willing to buy back the security at the market rateand does not honour his commitment, then the option left before the other party is to either sell it in the market or approach the Reserve Bank. There is no standard format governing the transaction," sources said. "To provide for such disputes and make the repo system in line with the international one, a standard format is the need of the hour," sources said.