“It has been decided to permit the introduction of cash settled futures on two-year and five-year notional coupon bearing Government of India security on currency derivatives segment of stock exchanges,” SEBI said while issuing the guidelines for the new instruments
Mumbai: In order to help investors guard against interest rate fluctuations, capital market regulator Securities and Exchange Board of India (SEBI) today introduced two-year and five-year exchange-traded IRFs (Interest Rate Futures) in government bonds, reports PTI.
“It has now been decided to permit the introduction of cash settled futures on two-year and five-year notional coupon bearing Government of India security on currency derivatives segment of stock exchanges,” SEBI said, issuing the guidelines for the new instruments.
The Reserve Bank of India (RBI), too, has issued notification in this regard.
Earlier, the IRF, traded on currency derivative segment of stock exchanges, was allowed in 91-day treasury bills and 10-year government securities.
Investors purchase or sell IRFs to hedge risks arising from fluctuation in interest rates, which depend on various factors including RBI policy, demand for liquidity and flow of overseas funds.
As per the guidelines, the minimum lot size for such instruments should be Rs2 lakh. Residents and foreign institutional investors (FIIs) can trade in these instruments.
India has an active government securities (G-Secs) market where primary issuance is at market-determined rates.
SEBI further said that in case of foreign institutional investors (FIIs), the total gross long (bought) position in cash and IRF markets taken together should not exceed their individual permissible limit for investment in G-Secs.
In November 2010 monetary review, the RBI had indicated that exchange traded IRFs on five and two-year notional coupon bearing G-Secs and 91-day Treasury Bills would be introduced after taking into account the experiences of cash-settled IRF regimes in other countries.
For hedging interest rate risk, besides the exchange- traded IRF, India also has a liquid and vibrant interest rate swaps (IRS) market.
The RBI said in the draft guidelines for implementation of Basel III capital regulation in India that the equity capital of a bank should not be less than 5.5% of risk-weighted loans. It has also suggested for setting up of the capital conservation buffer in the form of Common Equity of 2.5% of RWAs
Mumbai: In order to strengthen risk management mechanism, the Reserve Bank of India (RBI) on Friday issued draft guidelines envisaging that the equity capital of a bank should not be less than 5.5% of risk-weighted loans, reports PTI.
“Common Equity Tier 1 (CET 1) capital must be at least 5.5% of risk-weighted assets (RWAs),” RBI said in the draft guidelines for implementation of Basel III capital regulation in India.
Besides, it also recommends, Tier 1 capital comprising of pure equity and statutory and capital reserves must be at least 7% and total capital must be at least 9% of RWAs.
Besides, it has also suggested for setting up of the capital conservation buffer in the form of Common Equity of 2.5% of RWAs.
It is proposed that the implementation period of minimum capital requirements and deductions from Common Equity will begin from 1 January 2013 and be fully implemented as on 31 March 2017, it said.
However, it said, the capital conservation buffer requirement is proposed to be implemented between 31 March 2014 and 31 March 2017.
It also said that the instruments which no longer qualify as regulatory capital instruments will be phased-out during the period beginning from 1 January 2013 to 31 March 2022.
The central bank has invited comments and feedback on the draft guidelines, including implementation schedule by 15 February 2012.
RBI governor D Subbarao had said earlier this month that Indian banks will have to incur additional costs to build capital buffers to comply with Basel III rules.
Though the Indian banking sector was comfortably placed to implement Basel III regulations, some banks might need additional capital, he had said.
“On aggregate, banks are comfortably placed in terms of capital adequacy, but a few individual banks may fall short due to implementation of Basel III,” he had said.
Currently, RBI follows Basel II norms under which Tier I component is not only pure equity capital but Perpetual Non-cumulative Preference Shares (PNCPS), Innovative Perpetual Debt Instruments (IPDI) and capital reserves.
Banks are required to maintain a minimum Capital to Risk weighted Assets Ratio (CRAR) of 9% within this Tier 1 capital should be at least 6% of risk weighted assets.
Under the existing capital adequacy guidelines based on Basel II framework, total regulatory capital is comprised of Tier 1 capital (core capital) and Tier 2 capital (supplementary capital).
The draft norms have been adopted from the Basel Committee on Banking Supervision (BCBS) that issued a comprehensive reform package entitled ‘Basel III: A global regulatory framework for more resilient banks and banking systems” in December 2010.
The objective of the draft guideline is to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spill-over from the financial sector to the real economy.
The reform package relating to capital regulation, together with the enhancements to Basel II framework and amendments to market risk framework issued by BCBS in July 2009, will amend certain provisions of the existing Basel II framework, in addition to introducing some entirely new concepts and requirements, it said.
There are 20 nuclear power stations in India with excellent safety record. The establishment often tell us that nuclear reactors in India are designed to withstand natural disasters like earthquakes and tsunamis. So far they are more than vindicated, says Rajan Alexander
The Cyclone Thane that struck the southern coast of India on Friday did not damage the Madras Atomic Power Station (MAPS). In fact, operations at the MAPS, in located at Kalpakkam, 70km from Chennai on the east coast, continued unhindered when the cyclonic storm crossed the TN coast yesterday morning.
There are 20 nuclear power stations in India with excellent safety record. The establishment often tell us that nuclear reactors in India are designed to withstand natural disasters like earthquakes and tsunamis. So far they are more than vindicated, says Rajan Alexander.
He adds that during the massive Gujarat earthquake in 2001, with Bhuj as epicentre, the Kakrapar nuclear power plant was unaffected. In 2004 Tsunami that hit Tamil Nadu and Andhra coasts, the reactors at Kalpakkam were unaffected. Now comes further confirmation that despite the ‘very severe’ Cyclone Thane, the Kalpakkam reactor worked as usual. Surely, Cyclone Thane inflicted a massive blow on the Kudankulam anti-nuclear movement. Let’s hope they fizzle out soon.
Station director of MAPS K Ramamurthy said, “The units experienced slight variations in condenser vacuum due to increase in back pressure caused by high tide and due to ingress of shells and silt. In the last 24 hours, the maximum wind velocity was 45-50 kmph and the rainfall 96.6 mm.”
“As on December 30, MAPS UNIT-2 has completed 305 days of continuous operations” he added.
The cyclonic storm killed at least 33 persons in Tamil Nadu and left a trail of destruction and threw life out of gear in Cuddalore district and adjacent Union Territory of Puducherry.
The cyclonic storm Thane, however, left Andhra Pradesh coast unscathed after keeping everyone in the state on toes for the last two days. The two southern states were on high alert.