RBI’s New rule for Custodian Bank: T+1 Settlement Regime
The Reserve Bank of India (RBI) has revised its guidelines for custodian banks in response to the implementation of the T+1 settlement regime for stocks. These revised guidelines aim to enhance risk management practices within the custodian banking sector amidst the transition to a faster settlement cycle.
Key Highlights:
Maximum Intraday Risk: Custodian banks issuing Irrevocable Payment Commitments (IPCs) will face a maximum intraday risk equivalent to 30% of the settlement amount, classified as capital market exposure (CME).
Risk Mitigation Measures:
Cash margins reduce exposure by the amount paid.
Margins paid in permitted securities to mutual funds and foreign portfolio investors (FPIs) reduce exposure, subject to the Exchange's prescribed haircut on ac...