Inquisitive Mind

Reserve Bank of India (RBI) has published its annual report for the financial year 2023-24. In a series of articles, we will go through the highlights of the report. This is the first article in the series.  Legal framework for publication of Annual Report by RBI Report of the Central Board of Directors on the working of Reserve Bank of India (RBI) for the year is submitted to the Central Government in terms of Section 53(2) of Reserve Bank of India Act, 1934 ( RBI Act, 1934 ). The letter of transmittal is signed by the RBI Governor and addressed to the Finance Secretary, Ministry of Finance, Government of India. Documents submitted by RBI to the Central Government In pursuance of Section 53(2) of RBI Act, 1934, the following documents have been submitted to the Central Government – A copy of the Annual Accounts for the year ended March 31, 2024 certified by RBI’s Auditors and signed by Chief General Manager-in-charge, Deputy Governors and Governor. 2 copies of the Annual Report of...

Reserve Bank of India (RBI) has issued draft directions for Electronic Trading Platforms (ETPs). What is Electronic Trading Platform (ETP)? Electronic Trading Platform (ETP) shall mean any electronic system, other than a recognised stock exchange, on which transactions in eligible instruments are contracted. What are Eligible Instruments? Eligible Instruments shall mean securities, money market instruments, foreign exchange instruments, derivatives, or other instruments of like nature, as may be specified by RBI under section 45W of Chapter III-D of RBI Act, 1934. To whom shall the directions be applicable? The directions are issued to the entities operating ETPs on which transactions in eligible instruments are contracted. The directions shall not apply to electronic systems operated by scheduled commercial banks and standalone primary dealers for transactions in eligible instruments wherein the bank or the primary dealer operating the electronic system is the sole quote / price provi...

Reserve Bank of India (RBI) has issued directions on Asset Reconstruction Companies (ARCs). What are Asset Reconstruction Companies (ARCs)? Asset Reconstruction Companies (ARCs) acquire the non-performing assets (NPAs) from banks or financial institutions along with the underlying securities mortgaged and / or hypothecated by the borrowers to the lenders. The ARCs then try and manage or resolve these NPAs acquired from banks or financial institutions. To whom shall the directions be applicable? The directions shall apply to every ARC registered with RBI under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the Act). What are the guidelines on registration of ARCs? Before commencement of the business of securitisation or asset reconstruction, an ARC shall obtain a certificate of registration (CoR) from RBI as per Section 3 of the Act. An ARC shall commence business within 6 months from the date of grant of CoR. RBI m...

Reserve Bank of India (RBI) has issued directions on margining for non-centrally cleared over-the-counter (OTC) derivatives. What is derivative? Derivative means a financial contract, to be settled at a future date, whose value is derived from one or more financial, or non-financial variables. What are over-the-counter (OTC) derivatives? Over-the-counter (OTC) derivatives are the contracts that are traded directly between two eligible parties, with or without the use of an intermediary and without going through an exchange. What are non-centrally cleared derivatives (NCCDs)? Non-centrally cleared derivatives (NCCDs) mean derivative contracts whose settlement is not guaranteed by a central counterparty. Central counterparty means an entity that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the performance of open contracts. From when shall the directions...

Reserve Bank of India (RBI) has updated the guidelines on issuance of Irrevocable Payment Commitments (IPCs) by banks. What are Irrevocable Payment Commitments (IPCs)? Irrevocable Payment Commitment (IPC) means irrevocable confirmation issued by the custodian bank in favour of a stock exchange / clearing corporation of a stock exchange on behalf of its customers, to meet the payment obligation arising out of a 'buy' transaction. Why does IPCs issued by banks forms part of capital market exposure? Banks issue IPCs to various stock exchanges on behalf of Mutual Funds and Foreign Institutional Investor (FIIs) to facilitate the transactions done by these clients. IPCs are in the nature of non-fund based credit facility for purchase of shares and are treated at par with guarantees issued for the purpose of capital market operations. Such exposure of banks, therefore, forms part of their Capital Market Exposure (CME).  What are the guidelines on recognition of CME for IPCs issued by...