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Banking regulator RBI has allowed Indian banks and subsidiaries of foreign banks operating in GIFT-IFSC to act as Professional Clearing Member of the India International Bullion Exchange (IIBX).
The parent bank of the subsidiary has to seek a 'No Objection Certificate' from the RBI before its branch in GIFT-IFSC seeking professional clearing membership of IIBX, subject to fulfilment of the prudential requirements, said RBI in a statement on Tuesday.
With prior approval of the Board, eligible banks have to apply to RBI with details of its proposed business plan as a PCM along with particulars of the risk management architecture instituted at its branch in GIFT-IFSC, said RBI.
Banks should adhere to RBI guidelines on capital requirements for their exposures arising from their branch in GIFT-IFSC functioning as PCM on IIBX. The bank shall comply with the regulatory capital requirement of the host or home regulator, whichever is more stringent. The parent bank should meet RBI guidelines managing on liquidity risk, including those arising from its functioning as a PCM of IIBX as issued from time to time.
The bank shall ensure adherence to the extant RBI guidelines on the large exposure framework as issued from time to time, including all exposures taken by its branch in GIFT-IFSC.
With the approval of the bank’s Board, the branch in GIFT-IFSC shall, put in place an effective risk management framework, including the prudential limits in respect of each of its trading clients, considering their net worth, business turnover and other relevant parameters as per the bank’s assessment.
The branch of the bank in GIFT-IFSC may, as a PCM of IIBX, clear and settle trades executed by its clients as trading members of the exchanges subject to the condition that the total exposure which the branch would take on its clients should be determined by the Board in relation to the Tier 1 capital of the bank and the capital of its branch in GIFT-IFSC and shall be monitored on an ongoing basis, said RBI.
However, the bank shall ensure that its branch in GIFT-IFSC, in its role as a PCM, does not undertake any transaction/ activity on IIBX other than what is required as a professional clearing member, it added.
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