RBI eases primary dealers' exposure norms to QCCP

To promote centralised clearing of OTC derivative products, the Reserve Bank today eased stand-alone primary dealers' exposure ceiling to a qualified central counter party by keeping the limit outside the existing 25 per cent of net-owned funds.
The new norms would be effective Tuesday next, the central bank said in a notification.
Clearing exposure to a qualified central counter party will be kept outside of the exposure ceiling of 25 per cent of its NOF applicable to a single counter party, the RBI said.
The ceilings on single or group exposure limit would not be applicable where principal and interest are fully guaranteed by the government, it added.

The guidelines has also asked PDs (primary dealers) to include credit risk exposures to all other categories of non-government securities, including investments in MFs, commercial papers, certificate of deposits, positions in OTC derivatives not settled through QCCP, to compute the extent of credit exposure.
However, other exposures to qualified central counter party (QCCPs), like investments in the capital of a CCP, will continue to be within the existing exposure ceiling of 25 per cent of NOF to a single borrower or counter-party.

At present, there are four CCPs - Clearing Corporation of India, National Securities Clearing Corporation, Indian Clearing Corporation, and MCX-SX Clearing Corporation.

While the CCIL has been granted the status of a QCCP by RBI, the other three CCPs have been granted the status of QCCP by Sebi.
The RBI also reviewed the existing guidelines on capital charge for credit risk of standalone PD's exposure to interest rate derivative contracts, rep/reverse rep transactions and central counter parties have been reviewed.
The RBI said repo-style transactions shall attract capital charge for counter-party credit risk, in addition to the credit risk and market risk.