SEBI Proposes New Rules for Interest Income from Cash Collaterals

SEBI has released a consultation paper proposing that clearing corporations segregate client funds from their own funds. The market regulator suggested investing these funds in low-risk financial instruments, and any interest earned should be passed on to clearing members and then to clients. Public comments are invited until July 25.

Markets regulator SEBI has unveiled a new consultation paper addressing the treatment of interest income earned by clearing corporations from cash collaterals contributed by clearing members and upstreamed client funds. The watchdog aims to introduce significant changes to the existing practices.

The proposal mandates that clearing corporations segregate funds received from clearing members and clients from their own resources. This will ensure transparency and appropriate management of funds.

Additionally, SEBI recommends investing these funds in highly-liquid financial instruments that carry minimal market and credit risk. Any resultant interest or income should be credited back to the clearing members' collaterals after adjusting for applicable costs, taxes, and regulatory charges. Public feedback on these proposals is being solicited until July 25.

(With inputs from agencies.)