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RBI group moots establishing clearing agent abroad

The advisory group constituted by the Reserve Bank of India, which has constituted an advisory group on 'payment and settlement system', has recommended a set of actions, including establishment of a clearing agent abroad by Clearing Corporation of India.

The group, headed by NIBM chairman, M G Bhide, has also recommended an institution of a separate guarantee fund for foreign exchange clearing, appropriate integration between the participating banks and their interface with the real-time gross settlement system, an RBI release said in Bombay on Monday.

CCI may address specific needs of forex transactions of banks (situated in India) both in the short as well as in the long run and should attempt to achieve objectives like putting in place sound risk management systems and procedures for forex transactions, the group has said in part III of its report, which was submitted to the Standing Committee on July 9.

CCI may contemplate an arrangement to ensure that settlement takes place with Clearing Corporation itself, it said.

CCI may act as the common counterparty and arrive at the netted amount for all inter-bank transactions at the end of the day in respect of each member-bank. Settlement of netted amount in foreign exchange may be done by CCI itself through its clearing agent abroad while the rupee leg would be settled locally through the central bank account, RBI said.

On settlement guarantee fund, the group said such a fund of adequate size may be created in the event of any default, it added.

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