Executive Summary:
This circular from the Reserve Bank of India (RBI), effective February 09, 2024, permits scheduled commercial banks (excluding Regional Rural Banks) to participate in the India International Bullion Exchange IFSC Limited (IIBX) as Trading Member/Trading and Clearing Member (TM/TCM) or Special Category Client (SCC). Banks acting as TM/TCM need to obtain a No Objection Certificate (NOC) or provide intimation to the RBI. Banks authorized to import gold/silver need to provide intimation to RBI to act as SCC.
Key Points / Main Content:
* **Permitted Activities:**
* **Trading Member/Trading and Clearing Member (TM/TCM):**
* Branch/subsidiary/joint venture of Indian banks in GIFT IFSC can act as TM/TCM.
* TM/TCM can only execute trades on behalf of clients (no proprietary trading).
* Adherence to terms outlined in the June 07, 2022 circular is required.
* Compliance with RBI's Master Circular on Loans and Advances is mandatory.
* **Special Category Client (SCC):**
* Indian banks authorized to import gold/silver can act as SCC on IIBX.
* SCC can only execute buy trades on behalf of clients.
* Compliance with RBI's Master Circular on Loans and Advances is mandatory.
* SCCs must appoint an IFSC Banking Unit (IBU) as a clearing member.
* **Risk Management:**
* All client trades require 110% advance pay-in of funds (buy orders) or securities (sell orders).
* The Board may set a sub-limit for net overnight open position in gold/silver (not exceeding one tonne of gold equivalent) within the bank's overall Net Open Overnight Position Limit (NOOPL).
* **Procedure of Application to RBI:**
* **TM/TCM:** Parent bank must seek a No Objection Certificate (NOC) from the RBI before its branch/subsidiary/joint venture in GIFT IFSC seeks TM/TCM status (unless already granted NOC as PCM). Banks already granted NOC as PCM need to provide intimation to RBI to act as TM/TCM. The application should include a detailed business plan and risk management architecture.
* **SCC:** Banks authorized to import gold/silver can undertake SCC activities by sending prior intimation to the Department of Regulation, Reserve Bank of India.
* Additional approval is required from the RBI for any change in role or scope of activities at IIBX.
Impact Analysis:
**Scheduled Commercial Banks (excluding Regional Rural Banks)**
* Impact: New opportunities to participate in IIBX as TM/TCM or SCC, subject to conditions and approvals.
* Action Required:
* Banks that want to act as TM/TCM, the parent bank needs to apply for NOC from RBI (unless already has NOC as PCM) or provide intimation to RBI. Prepare a detailed business plan and risk management architecture.
* Banks that want to act as SCC, need to send prior intimation to the Department of Regulation, Reserve Bank of India.
* Comply with all outlined regulations, including risk management and reporting requirements.
* Seek additional approval from RBI for any change in the role or scope of activities at IIBX.
Key Entities Referenced
Reserve Bank of India: The central bank of India, the primary regulator mentioned in the document.
India International Bullion Exchange IFSC Limited (IIBX): A bullion exchange in GIFT IFSC where Indian banks are now allowed to participate as Trading Members/Trading and Clearing Members and Special Category Clients.
GIFT IFSC: Gujarat International Finance Tec-City International Financial Services Centre, where the IIBX is located.
Banking Regulation Act, 1949: The Act under which the Reserve Bank of India derives its power to issue the instructions in the circular.
Master Circular Loans and Advances Statutory and Other Restrictions dated July 01, 2015: A circular containing extant RBI instructions regarding loans and advances, statutory and other restrictions to be adhered to.
Foreign Trade Policy: The policy that governs the import and export of goods and services in India; referenced in the context of gold/silver imports.
Master Direction Risk Management and Inter-Bank Dealings dated July 05, 2016: Master Direction pertaining to Risk Management and Inter-Bank Dealings
Department of Regulation, Reserve Bank of India: The department within the Reserve Bank of India to which banks must apply for No Objection Certificates or send intimations.
भारतीय �रज़व र् बक�
_____________________ RESERVE BANK OF INDIA ______________________
www.rbi.org.in
RBI/2023-24/120
DoR.AUT.REC.74/24.01.041/2023-24 February 09, 2024
All Scheduled Commercial Banks
Madam/Dear Sir,
Participation of Indian Banks on India International Bullion Exchange IFSC
Limited (IIBX)
Please refer to the circular Branches of Indian Banks operating in GIFT-IFSC – acting
as Professional Clearing Member (PCM) of India International Bullion Exchange IFSC
Limited (IIBX) dated June 07, 2022. On review, it has been decided to additionally allow:
a) Branch/subsidiary/joint venture of an Indian bank in GIFT-IFSC to act as a Trading
Member (TM)/Trading and Clearing Member (TCM) of IIBX, and
b) Indian banks authorized to import gold/silver to act as Special Category Client1 (SCC)
of IIBX.
The detailed instructions in this regard are at ANNEX to this Circular.
2. These instructions are issued in exercise of the powers conferred on the Reserve
Bank of India under Section 35A of the Banking Regulation Act, 1949. In the event of
non-compliance with extant guidelines, or if the Reserve Bank is satisfied that it is
necessary and expedient in the public interest to do so, it may issue further necessary
directions (including revocation of approval) and/or impose additional conditions, as it
deems fit.
Commencement
3. The provisions contained in the circular shall be effective from the date of this circular.
Applicability
4. This circular is applicable to all Scheduled Commercial Banks (other than Regional
Rural Banks).
Yours faithfully,
(Manoranjan Padhy)
Chief General Manager
1 As is defined in IFSCA’s circular F.No.329/IFSCA/Bullion MIIs/2023-24/02 dated December 11, 2023
िविनयमन िवभाग, क��ीय कायार्लय, क��ीय कायार्लय भवन, 12व�/ 13व� मंिज़ल, शहीद भगत �संह माग,र् फोटर्, मुंबई - 400001
टेलीफोन/ Tel No: 22661602, 22601000 फैक्स/ Fax No: 022-2270 5691
Department of Regulation, Central Office, Central Office Building, 12th/ 13th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001ANNEX
[Encl. to circular DoR.AUT.REC.74/24.01.041/2023-24 dated February 09, 2024]
A. Permitted Activity
1. Trading Member/Trading and Clearing Member (TM/TCM) of IIBX
a) The TM/TCM shall execute trades only on behalf of clients (without proprietary
trading).
b) The bank in its role as TM/TCM shall ensure adherence to the terms and conditions
as outlined in para 5 of the circular on Branches of Indian Banks operating in GIFT-
IFSC – acting as PCM of IIBX dated June 07, 2022.
c) The bank shall ensure adherence to extant RBI instructions as contained in the
Master Circular – Loans and Advances – Statutory and Other Restrictions dated
July 01, 2015 (as updated from time to time).
d) The bank shall comply with the conditions, if any, stipulated by other regulatory
bodies that may be relevant for its role.
2. Special Category Client (SCC) of IIBX
As per the extant Foreign Trade Policy, the Reserve Bank grants annual import
authorization to banks for import of gold/silver. Such banks, in addition to the
consignment model in domestic tariff area, are hereby allowed to operate as a SCC on
IIBX for import of gold/silver.
a) The SCC shall execute only buy trades on behalf of clients.
b) The bank shall ensure adherence to extant RBI instructions as contained in the
Master Circular – Loans and Advances – Statutory and Other Restrictions dated July
01, 2015 (as updated from time to time).
c) The SCCs will appoint one of the IFSC Banking Units (IBUs) to act as clearing
member on their behalf.
d) The bank shall comply with the conditions, if any, stipulated by other regulatory
bodies that may be relevant for its role.
B. Risk Management
a) All client trades placed on the exchange shall be against 110% advance pay-in of
funds (buy order) of the expected value of bullion (quantity & quality specification)
-2-intended to be purchased and securities (sell order) in the account of the bank, as is
applicable.
b) With reference to the Net Open Overnight Position Limit (NOOPL) for a bank as
prescribed in Master Direction - Risk Management and Inter-Bank Dealings dated
July 05, 2016 (as updated from time to time), the Board may determine a global sub-
limit for net overnight open position in gold/silver, which shall not exceed one tonne
of gold equivalent.
C. Procedure of Application to RBI
a) For TM/TCM activities, the parent bank (‘bank’) shall seek a No Objection Certificate
(NOC) from the Reserve Bank prior to its branch/subsidiary/joint venture in GIFT-
IFSC seeking TM/TCM status on IIBX, subject to fulfilment of the prudential
regulations as set out in Para 21 of the Master
Direction/DBR.FSD.No.101/24.01.041/2015-16 dated May 26, 2016 (as updated
from time to time). An eligible bank shall, with prior approval of its Board, make an
application to the Department of Regulation, Reserve Bank of India with details of its
proposed business plan as a TM/TCM for facilitating client trade along with
particulars of the risk management architecture.
[A bank which has already been granted NOC by the Reserve Bank for its branch in
GIFT-IFSC to act as Professional Clearing Member (PCM) of IIBX (as on date) need
not take a separate approval from the Reserve Bank for obtaining TM/TCM status
on IIBX. They should, however, give a prior intimation to the Department of
Regulation, Reserve Bank of India while seeking to take up activities as TM/TCM on
the IIBX].
b) Banks authorized to import gold/silver can undertake the activities of an SCC by
sending prior intimation to the Department of Regulation, Reserve Bank of India.
c) A bank acting as a TM/TCM/SCC of IIBX shall be required to seek additional
approval from the Department of Regulation, Reserve Bank of India in case of any
change in their role or scope of activities at IIBX from those permitted by this circular.
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