What changed
Previously, Indian bank branches in GIFT-IFSC were not explicitly allowed to serve as PCM for IIBX. Now, RBI has issued a notification under Section 35A of the Banking Regulation Act, 1949, permitting this role subject to specific conditions. Banks must apply for a NoC and adhere to prudential requirements from the Master Direction dated May 26, 2016.
What it means for you
This opens a new revenue stream for banks with GIFT-IFSC branches, enabling them to clear and settle bullion trades on IIBX. Banks must strengthen risk management frameworks, set client exposure limits relative to Tier 1 capital, and comply with both home and host regulator norms. Non-compliance may invite RBI directions.
What you must do
- Obtain board approval and apply to RBI's Department of Regulation for a NoC before your GIFT-IFSC branch seeks PCM membership.
- Ensure your branch's risk management architecture covers capital adequacy, liquidity risk, large exposure limits, and client-specific prudential limits.
- Set client exposure limits based on Tier 1 capital and monitor them continuously; restrict branch activities to PCM functions only.
- Comply with all margin requirements set by your board and any conditions from other regulatory bodies.
- Review and align with the more stringent of home or host regulator guidelines on capital and risk management.
Who it affects
Scheduled commercial banks (domestic and foreign banks with WOS in India) authorized to deal in foreign exchange and with a branch in GIFT-IFSC
Which banks are eligible to apply for PCM status on IIBX?
Domestic scheduled commercial banks and foreign banks with a Wholly Owned Subsidiary in India that are authorized to deal in foreign exchange and have a branch in GIFT-IFSC are eligible.
What is the key prudential requirement for capital?
Banks must comply with the more stringent of home or host regulator capital requirements for exposures from PCM activities, including default fund contributions and client exposures.
Can the GIFT-IFSC branch undertake any other activities as a PCM?
No, the branch must restrict its role to clearing and settling trades as a professional clearing member and cannot engage in any other transactions on IIBX.