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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Banks' Exposure to Capital Market - Issue of Irrevocable Payment Commitments (IPCs)

03-May-2024 | RBI/2024-2025/33 DOR.CRE.REC.22/21.03.054/2024-25

Reserve Bank of India has issued circular on Banks' Exposure to Capital Market - Issue of Irrevocable Payment Commitments (IPCs). By virtue of the circular, all IPCs issued by custodian banks under the T+1 settlement cycle shall comply with the following instructions: i) Only those custodian banks will be permitted to issue IPCs, who have a clause in the Agreement with clients giving the banks an inalienable right over the securities to be received as pay out in any settlement. ii) The maximum intraday risk to the custodian banks issuing IPCs would be reckoned as Capital Market Exposure (CME) at 30 percent of the settlement amount. iii) In case margin is paid in cash, the exposure will stand reduced by the amount of margin paid. In case margin is paid by way of permitted securities to Mutual Funds / Foreign Portfolio Investors, the exposure will stand reduced by the amount of margin after adjusting for haircut as prescribed by the Exchange on the permitted securities accepted as margin. iv) Under T+1 settlement cycle, the exposure shall normally be for intraday. v) The underlying exposures of banks to their counterparties, emanating from the intraday CME, will be subject to limits prescribed under Large Exposure Framework dated June 3, 2019, as amended from time to time. For more information, refer the attachment.

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