RBI issued guidelines for setting up of an FBAs for administering “significant benchmarks”

On June 26, 2019, The Reserve Bank of India (RBI) has issued a regulatory framework for setting up of financial benchmark administrator (FBA) for administering ‘significant benchmarks’ in the markets for financial instruments.Key points:

  • Significant benchmarks:  It means any benchmark notified by the central bank taking into consideration its use, efficiency, and relevance in domestic financial markets and the benchmarks administered outside India do not fall under the norms.
  • RBI’s authorization: Without obtaining the authorization of the Reserve Bank, FBA will not administer a ‘significant benchmark’.
  • FBAs: It will be incorporated in India as a company that will maintain a minimum net worth of Rs 1crore at all times.
  • The function of FBAs: It ensures significant benchmark’ is designed to be an accurate and reliable representation of the referenced (specified) financial instrument and data used for the administration based on an active market involving transactions then it submits the report to RBI.
  • The guidelines are based on the report by RBI’s executive director P Vijaya Bhaskar on June 28, 2013, which was formed after the global benchmark rates like the Libor, Euribor of European Union, etc controversy.