RBI Imposes Rs 300 Crore Net Worth Requirement for Central Counterparty Authorisation

RBI Imposes Rs 300 Crore Net Worth Requirement for Central Counterparty Authorisation

The Reserve Bank of India has announced a new regulatory requirement for entities seeking authorisation as a Central Counterparty (CCP) mandating a minimum net worth of Rs 300 crore at the time of application submission. This decision comes as part of the updated guidelines that the RBI released on Monday revising the norms initially set in June 2019 for CCPs which play a crucial role in the financial market.

A Central Counterparty acts as an intermediary in financial transactions by interposing between system participants thereby facilitating the settlement process. The CCP essentially becomes the buyer to every seller and the seller to every buyer ensuring that transactions are settled smoothly. This structure helps mitigate counterparty risk making financial markets more secure and efficient.

Under the new directives every authorised CCP must submit an audited net worth certificate from a statutory auditor within six months following the closure of the financial year. Additionally it is stipulated that an authorised CCP must operate as a public company limited by shares ensuring a level of transparency and accountability in its operations.

The RBI further clarified that the shares of an authorised CCP should be held exclusively by users of the CCP. In cases where an individual ceases to be a user the CCP is required to ensure that the individual's shares are divested. This rule aims to maintain the integrity of the CCP and ensure that it remains aligned with the interests of its users.

For foreign CCPs seeking to operate in India they must apply to the RBI for approval to be recognised as a CCP. This process includes the authority to clear and settle transactions within the Indian market which is essential for maintaining regulatory oversight and ensuring compliance with local laws.

Additionally every authorised CCP is required to establish a regulatory compliance committee led by an independent director to oversee its adherence to regulatory requirements and maintain high governance standards. This move reflects the RBI's commitment to strengthening the operational framework of CCPs in India ensuring they function effectively while safeguarding market integrity.