On July 28, 2023, Union Minister Nirmala Sitharaman, Ministry of Finance, initiated the trading on Limited Purpose Clearing Corporation (LPCC) mechanism called AMC Repo Clearing Limited (ARCL), during an event organized by Securities and Exchange Board of India (SEBI) in Mumbai, Maharashtra
- She also inaugurated Corporate Debt Market Development Fund (CDMDF).
- Both the initiatives intend to deepen the functioning of the corporate debt markets.
About ARCL:
The Union Minister launched the triparty repo in corporate debt securities offered through ARCL, a LPCC aimed at developing the underlying Corporate Bond market in India.
ARCL, setup by MFs)managing debt Assets under management (AUM) acts as a Central Counter Party (CCP) that facilitates clearing and settlement services of corporate bond repo transactions.
- During its launch, ARCL successfully conducted its first transaction, with a total traded value of Rs 480 crore.
Aim of ARCL:
To develop an active repo market, which will enhance liquidity in the underlying corporate bond market
Key Points:
i.ARCL as a market infrastructure institution envisages creating a market for short-term borrowing against corporate debt securities.
ii.It has set up a Core Settlement Guarantee Fund, funded by contributions from corporate bond issuers.
- This fund provides settlement guarantees, eliminating the need for bilateral counterparty exposure limits.
iii.ARCL came into existence in April 2021 and operates under the regulations of the Stock Exchanges and Clearing Corporations (SECC) Regulations, 2018.
About CDMDF:
The CDMDF is Rs 33,000-crore backstop facility for Mutual Funds (MFs), first mooted in the Union Budget of 2021-22. It was approved by SEBI in March 2023.
Of the Rs 33,000 crore, Rs 30,000 crore will come from the government, while the balance Rs 3,000 crore will be contributed by the Asset Management Companies (AMCs).
- SBI (State Bank of India) MF will be managing the fund.
- CDMDF will enhance secondary market liquidity in the Corporate Bond market during stressed and normal times, thereby instilling confidence amongst participants in corporate bond market.
- Click Here to Read about CDMDF
Participants:
Secretary, Department of Economic Affairs (DEA) Shri Ajay Seth; Chairperson, Securities and Exchange Board of India (SEBI) Madhabi Puri Buch, among others.
Recent Related News:
i.On 26th April 2023, Union Minister Nirmala Sitharaman, Ministry of Finance, approved the upgradation of Rail Vikas Nigam Limited (RVNL) to a Navratna Central Public Sector Enterprise (CPSE) from a Category-I MiniRatna CPSE.
ii.8th April 2023, the Ministry of Finance marked the 8th anniversary of the launch of the Pradhan Mantri MUDRA (Micro Units Development and Refinance Agency) Yojana (PMMY).
About Ministry of Finance:
Union Minister – Nirmala Sitharaman (RajyaSabha- Karnataka)
Ministers of State (MoS) – Pankaj Chaudhary; Dr. Bhagwat Kishanrao Karad
Departments – Department of Expenditure; Department of Economic Affairs (DEA);
Department of Revenue; Department of Financial Services; Department of Investment and Public Asset Management (DIPAM) & Department of Public Enterprises
