Reserve Bank's Historic Move: Indian Banks Granted Expanded Roles on IIBX

 

In a groundbreaking development, the Reserve Bank of India (RBI) has announced significant enhancements to the participation of Indian banks on the India International Bullion Exchange IFSC Limited (IIBX). The circular, dated February 09, 2024, introduces a paradigm shift, allowing greater involvement and diversified roles for banks operating in the GIFT-IFSC.

Expanded Roles for Indian Banks:

1. Trading Member (TM)/Trading and Clearing Member (TCM): Indian banks, including branches, subsidiaries, and joint ventures in GIFT-IFSC, are now empowered to act as Trading Members (TM) or Trading and Clearing Members (TCM) of IIBX. This move signifies a broadening of their scope beyond Professional Clearing Members (PCMs), as outlined in the previous circular of June 07, 2022.

2. Special Category Client (SCC): Furthermore, Indian banks authorized to import gold/silver are now permitted to operate as Special Category Clients (SCC) on IIBX. This expands their role, allowing them to execute buy trades on behalf of clients in the import of precious metals.

Key Instructions and Risk Management Measures:

The circular emphasizes the importance of adherence to terms and conditions, risk management measures, and compliance with extant RBI instructions. Noteworthy instructions include:

- TM/TCM shall execute trades only on behalf of clients without proprietary trading.

- SCCs will execute only buy trades on behalf of clients and appoint an IFSC Banking Unit (IBU) as a clearing member.

- Stringent risk management measures, including 110% advance pay-in of funds for client trades, are introduced to ensure financial prudence.

Application Process:

The RBI outlines a meticulous application process for banks seeking TM/TCM status or intending to operate as SCCs on IIBX. This involves obtaining a No Objection Certificate (NOC) for TM/TCM activities, adhering to prudential regulations, and seeking additional approval for any change in their role or scope of activities.

Effective Date and Applicability:

The provisions contained in the circular are effective immediately from the date of issuance and are applicable to all Scheduled Commercial Banks, excluding Regional Rural Banks.

This historic move by the RBI is poised to reshape the landscape of bullion trading, promoting increased participation and diversified roles for Indian banks on the international stage. Stay tuned for further insights into this transformative development! #RBI #IIBXExpansion 🌐🏦✨