RBI Revises Extant Guidelines on Issuance of ‘Irrevocable Payment Commitments’ by Banks

Circular No. RBI/2024-25/33 DOR.CRE.REC.22/21.03.054/2024-25; Dated: 03.05.2024

RBI has revised the extant guidelines on issuance of ‘Irrevocable Payment Commitments’ by banks in the light of T+1 settlement cycle. Accordingly, only those custodian banks will be permitted to issue IPCs, which have a clause in the agreement with clients giving the banks an inalienable right over the securities for receiving a payout in settlement.

Further, the maximum intraday risk to custodian banks issuing IPCs would be reckoned as Capital Market Exposure (CME) at 30% of settlement amount. This is based on the assumption of a 20% downward price movement of the equities on T+1, with an additional margin of 10% for further downward movement of price.

Also, in case the margin is paid in cash, the exposure will stand reduced by the amount of margin paid. In case, the margin is paid by way of permitted securities to Mutual Funds/Foreign Portfolio Investors, the exposure will stand reduced by the amount of margin after adjusting for haircut as prescribed by the Exchange on the permitted securities accepted as margin.

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