According to sources, the Reserve Bank of India (RBI) may be willing to soften its stance in favour of reaching a market infrastructure deal with European authorities, provided the latter abandon their desire to examine and sanction Indian intermediaries like the Clearing Corp of India (CCIL). international banks that operate in India, such as Credit Suisse, BNP Paribas, Societe Generale, and Deutsche Bank, are impacted by discussions over the de-recognition of CCIL by international authorities, which started in March.
Recent conversations indicate that the RBI is now more prepared to agree to a new Memorandum of Understanding (MoU) with foreign regulators provided their request to audit and inspect the CCIL’s accounts and levy fines is eased or avoided in a way that protects regulatory rights. The trading activities of numerous continental European banks that serve as custodians of foreign investment flow would be impacted by the CCIL’s loss of recognition.
A modified form of the requirement for CCIL’s inspection and audit may result from the planned introduction of new rules in Europe, such as the most recent version of the European Market Infrastructure Regulation (EMIR). While still conducting business with Indian clearinghouses, European banks would have to pay a penalty capital fee.
The present conflict was brought on by the ESMA’s de-recognition of six Indian clearinghouses, including CCIL, in October 2022. The European Securities and Markets Authority (ESMA) had previously set their banks an April 30, 2023 deadline, but in February, German and French financial regulatory agencies granted extensions until October 2024. European banks may be subject to a criminal capital charge even though they are still permitted to transact with CCIL and other Indian clearinghouses. The RBI has not yet provided a statement on this issue.
