RBI/2010-11/249
DBOD.Dir.BC.52 /13.03.00/2010-11
October 28, 2010
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir / Madam
Banks' Exposure to Capital Market -
Issue of Irrevocable Payment Commitments (IPCs)
Please refer to our circular No.
DBOD.Dir.BC.46/13.03.00/2010-11 dated September
30, 2010 in terms of which certain risk mitigation measures were prescribed in
the context of banks issuing IPCs to various Stock Exchanges on behalf of Mutual
Funds and FIIs, as a transitionary arrangement upto October 31, 2011.
- Custodian banks have expressed operational difficulties in complying with the
requirement of incorporating a clause in the agreement with their clients which
gives them an inalienable right over the securities to be received as payout in
any settlement before November 1, 2010. Accordingly, it has been decided to
grant an additional period of two months i.e. upto December 31, 2010, to the
custodian banks to fulfil this requirement.
- It is also clarified that in cases where transactions are pre-funded i.e.
there are clear INR funds in the customer’s account and, in case of FX deals,
the bank’s nostro account has been credited before the issuance of the IPC by
custodian banks, the requirement of the clause of inalienable right over the
security to be received as payout in the agreement with the clients will not be
insisted upon.
Yours faithfully,
(P. R. Ravi Mohan)
Chief General Manager