New Delhi [India], The Reserve Bank of India (RBI) has issued instructions to banks regarding their exposure to the capital market, emphasizing compliance with the prescribed guidelines. In the latest circular, specifically relating to “Exposure of banks to the capital market – the issue of Irrevocable Payment Commitment (IPC)”, the RBI move comes in line with the change in settlement cycle initiated by stock exchanges, from T+2 to T+. Has come in response to. 1 Rolling Settlement for Equity Consequently, the existing guidelines on issuance of IPC by banks have been reviewed to ensure sync with the new settlement cycle. Custodian banks issuing IPCs must have a clause in their agreements with customers, which grants the banks an inalienable right over it. Securities received as payment in any settlement.However, this clause is not mandatory for pre-funded transactions where clear INR funds are available in the customer's account or where the Nostro account of the Bank has been credited before issuance of IP. The maximum intraday exposure for custodian banks issuing IPCs is capped at 3 per cent. of settlement amount. The calculation is based on the assumption of a 20 per cent decline in the equity price at T+1, with an additional margin of 10 per cent for further decline. If margin is paid in cash, the exposure is reduced by the margin amount paid. Will be reduced. , If margin is paid to Mutual Fund Foreign Portfolio Investors with permitted securities, the exposure will be reduced by the amount o margin after adjustment of haircut determined by the exchange on securities accepted as margin if there is no exposure T+K. Finally, Indian Standard Time Capital on outstanding capital market exposures should be maintained as per the Master Circular of April 1, 2024 – Basel III Capital Regulation, arising from intraday capital market exposure (CME) of banks towards their counterparties. There will be built-in exposures. The circular clarifies that the instructions for the T+2 settlement cycle will remain unchanged, subject to the limits prescribed under the Large Exposures Framework dated June 3, 2019.These directions will be effective immediately upon issue and are aimed at ensuring prudent risk management practices among banks operating in the capital. In the light of these market developments, banks are expected to adjust their operations accordingly to comply with the revised guidelines prescribed by the RBI.