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Financial Benchmark Administrators

Reserve Bank of India (RBI) has issued directions on Financial Benchmark Administrators (FBA).

Who is Financial Benchmark Administrator (FBA)?

Financial Benchmark Administrator (FBA) means a person who controls the creation, operation and administration (i.e. production and dissemination) of benchmarks.

What is benchmark?

Benchmarks mean prices, rates, indices, values or a combination thereof related to financial instruments that are calculated periodically and used as a reference for pricing, valuation or settlement of financial instruments or any other financial contract.

What is significant and non-significant benchmark?

Significant benchmark means any benchmark notified by Reserve Bank of India (RBI) as a ‘significant benchmark’ taking into consideration its use, efficiency and relevance in domestic financial markets. 

Non-significant benchmark means a benchmark other than the ‘significant benchmarks’.

Which benchmarks are covered by FBA directions?

The directions shall apply to FBAs administering benchmarks based wholly or partially on financial instruments referred to or specified under Section 45W of the RBI Act, 1934.

The directions shall not apply to administration of the following benchmarks –

  • Benchmarks administered and used outside India.
  • Benchmarks determined by a person and used internally by the person for the purpose of pricing or valuation of financial instruments.
  • Benchmarks used by the clearing corporations recognised by RBI or Securities Exchange Board of India (SEBI) for the purpose of internal risk management.

What are the requirement for operating as FBAs?

 

 FBA administering ‘significant benchmark’ FBA administering ‘non-significant benchmark’
Type of Entity A company incorporated in India
Minimum Net-worth ₹5 crore ₹1 crore

What are the requirements for administration of benchmarks by FBA?

FBA shall administer a benchmark only after obtaining authorisation from RBI.

An FBA shall apply to RBI for authorisation in following cases –

  • FBA which is already administering a benchmark shall apply within 3 months from the date of FBA directions.
  • If RBI notifies a ‘non-significant benchmark’ as a significant benchmark, FBA administering the ‘non-significant benchmark’ shall apply within 3 months from the date of notification.


References

Reserve Bank of India. (2023, December 28). 'Reserve Bank of India (Financial Benchmark Administrators) Directions, 2023'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12581&Mode=0


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