RBI, European body ink MoU to end clearing house standoff

Mumbai: The Reserve Bank of India (RBI) and the European Securities and Markets Authority (ESMA) have signed a memorandum of understanding (MoU), ending a two-year standoff over supervisory oversight of India's central clearing agencies.

The agreement will facilitate cooperation and information exchange and pave the way for recognition of central counterparties based in India and regulated by RBI.

It could significantly enhance European access to India's financial markets, according to experts. Without such recognition, European banks face higher costs while trading in Indian bonds, discouraging participation, they said.


"This establishes a framework for ESMA to place reliance on RBI's regulatory and supervisory activities while safeguarding the European Union's financial stability," RBI said on Tuesday.

It signifies ESMA's agreement to rely on RBI's regulatory and supervisory oversight of Indian financial market entities, rather than exercising direct supervision itself, while ensuring that such reliance does not compromise the stability of the European Union's financial system.

ESMA withdrew recognition of six Indian clearing houses in October 2022 after regulatory concerns remained unresolved. The European regulator had sought changes to the cooperation agreement, but Indian authorities resisted granting ESMA supervisory powers to inspect Indian clearing corporations.

The revised MoU allows the Clearing Corporation of India to re-apply for recognition under European Market Infrastructure Regulation, ESMA said in a statement