India’s RBI Considers Softening Stance on Deal with European Regulators

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.

Q1: What is the role of RBI in regulating foreign banks?

Ans: The Reserve Bank of India is entrusted with the duty of overseeing the investment of the nation’s foreign exchange reserves as its custodian. The Reserve Bank of India Act, of 1934 contains the legislative guidelines guiding the administration of foreign exchange reserves.

Q2: What is EMIR?

Ans: EMIR stands for European Market Infrastructure Regulation.

Q3: What will the modified form of requirement for CCIL inspection & audit do?

Ans: The anticipated implementation of new regulations in Europe, such as the most current version of the European Market Infrastructure Regulation (EMIR), may lead to a modified version of the necessity for CCIL’s inspection and audit.


  • Pritipalit

    Priti Palit, an accomplished edtech writer, boasts a wealth of experience in preparing candidates for multiple government exams. With a passion for education and a keen eye for detail, she has contributed significantly to the field of online learning. Priti's expertise and dedication continue to empower aspiring individuals in their pursuit of success in government examinations.

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