The Securities and Exchange Board of India (Sebi) has instructed clearing corporations (CCs) to broaden their exposure to banks by incorporating cash, fixed deposits, and bank guarantees.
As per the updated regulations, the exposure to a single bank must not exceed 15 per cent of the average daily exposure over the previous three months, considering liquid assets for banks rated AAA. For banks with AA ratings, this limit is capped at 10 per cent.
SEBI has outlined additional criteria for bank selection based on factors such as financials, net-worth, capital adequacy and creditworthiness, including long-term credit ratings.
"In the event of exposure to banks failing to meet any eligibility conditions, CCs are required to rebalance their exposure through own funds and Core SGF within three months," stated Sebi.
Furthermore, Sebi has restricted CCs' total exposure to equity and debt instruments of an issuer, received as collateral to 15 per cent.
In addition to revising exposure norms, Sebi has also updated the types of collaterals accepted by CCs, which include cash, bank FDs, bank guarantees, units of liquid mutual funds, or government securities.
Sebi specified, "Units of the growth plan of overnight mutual fund schemes shall be accepted as Cash Equivalent by CCs with a haircut of 5 per cent, while for other plans of overnight mutual fund schemes, the haircut of 10 per cent shall remain applicable."
Moreover, certain equity shares will also be accepted as part of other liquid assets, according to the regulator.
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