Module: | Capital Adequacy, Basel Norms & Monetary Policy
Q11: Consider the following statements regarding the revised RBI guidelines on collateral mandates for credit facilities extended to Capital Market Intermediaries (CMIs):
1. All credit facilities extended by banks to CMIs must now be provided on a fully secured basis, with 100% collateral coverage maintained on a continuous basis.
2. Partial unsecured guarantees and promoter-only guarantees are permanently discontinued, and will no longer suffice for CMI credit lines.
3. Unsecured or partially secured funding lines are entirely abolished across the board, under the new regulatory framework.
4. Facility agreements must contain explicit provisions for immediate margin calls, in the event of collateral value shortfalls.
Which of the statements given above is/are correct?
2. Partial unsecured guarantees and promoter-only guarantees are permanently discontinued, and will no longer suffice for CMI credit lines.
3. Unsecured or partially secured funding lines are entirely abolished across the board, under the new regulatory framework.
4. Facility agreements must contain explicit provisions for immediate margin calls, in the event of collateral value shortfalls.
Which of the statements given above is/are correct?
✅ Correct Answer: D
The correct answer is D. Under the RBI's 'Credit Facilities to Capital Market Intermediaries (CMIs)' directions, strictly effective from April 1, 2026, the regulatory framework shifts to a zero-tolerance policy for unsecured CMI lending.
All credit facilities must be 100% fully secured on a continuous basis, making Statement 1 absolutely correct.
Consequently, the older practices of relying on partial unsecured guarantees or promoter guarantees are permanently banned, making Statement 2 correct.
Unsecured and partially secured funding lines are entirely abolished across all exposure types without exception, validating Statement 3. To ensure the 100% collateral coverage never breaches limits during market volatility, banks are mandated to include explicit margin call provisions in their facility agreements to address any drop in collateral valuation instantly, making Statement 4 correct.
Options A, B, and C fail to recognize the validity of all the listed regulatory mandates.
All credit facilities must be 100% fully secured on a continuous basis, making Statement 1 absolutely correct.
Consequently, the older practices of relying on partial unsecured guarantees or promoter guarantees are permanently banned, making Statement 2 correct.
Unsecured and partially secured funding lines are entirely abolished across all exposure types without exception, validating Statement 3. To ensure the 100% collateral coverage never breaches limits during market volatility, banks are mandated to include explicit margin call provisions in their facility agreements to address any drop in collateral valuation instantly, making Statement 4 correct.
Options A, B, and C fail to recognize the validity of all the listed regulatory mandates.