New Delhi: Strengthening its risk management mechanism, markets regulator Sebi on Friday barred banks from using their own Fixed Deposit Receipts (FDRs) as collateral in their function as trading or clearing members of stock exchanges, directly or through associate entities.
In a circular to clearing corporations, Sebi asked them not to accept such FDRs while trading or clearing members having already deposited their own FDRs or that of associate banks would need to replace them with other eligible collaterals within six months.
Sebi said it has observed that some banks who are also trading members or clearing members on the stock exchange/ clearing corporation have placed Fixed Deposit Receipts issued by themselves as collateral, with the clearing corporation.
However, Sebi's Risk Management Review Committee, after taking into account the global benchmarks set for collaterals by the international securities regulator body IOSCO, suggested that there is a need to align the risk management practices in Indian markets with the global principles.
Accordingly, Sebi has directed that "clearing corporation shall not accept FDRs from trading/clearing members as collateral, which are issued by the trading/ clearing member themselves or banks who are associate of trading/ clearing member".
Besides, within a period of six months, "members who have deposited their own FDRs or FDRs of associate banks shall replace such collateral, with other eligible collateral as per extant norms", the regulator said.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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