Description
ICCL updates penalty framework for SLB position limit violations and margin shortfalls, introducing tiered penalties ranging from Rs 5,000 to Rs 10,000 per instance with escalation to Member Committee for repeated violations.
Summary
Indian Clearing Corporation Ltd (ICCL) has issued revised penalty norms for Securities Lending and Borrowing (SLB) participants, partially modifying circular no. 20201223-69 dated December 23, 2020. The circular establishes a tiered penalty structure for position limit violations and margin shortfalls, with penalties escalating based on frequency of violations within a calendar month.
Key Points
- First instance of position limit violation in a calendar month attracts no penalty
- Penalties range from Rs 5,000 to Rs 10,000 per instance based on violation frequency
- 11th instance onwards triggers referral to Member Committee in addition to monetary penalty
- Margin violations attract 0.07% per day charge plus instance-based penalties
- Violations monitored on end-of-day basis with no additional daily penalties for unclosed positions
- No penalty for violations caused by ICCL’s revision of limits during the month
- Applicable taxes and charges will be levied on all penalties
Regulatory Changes
Position Limit Violation Penalties:
- 1st instance: No penalty
- 2nd to 5th instance: Rs 5,000 per instance
- 6th to 10th instance: Rs 10,000 per instance
- 11th instance onwards: Rs 10,000 per instance + Referral to Member Committee
Margin Violation Penalties:
- 1st instance of disablement: 0.07% per day
- 2nd to 5th instance: 0.07% per day + Rs 5,000 per instance
- 6th to 10th instance: 0.07% per day + Rs 10,000 per instance
- 11th instance onwards: 0.07% per day + Rs 10,000 per instance + Referral to Member Committee
Compliance Requirements
- SLB participants must adhere to position limits specified by ICCL at all levels (member level, financial institution level, client level)
- Participants must maintain adequate liquid assets with ICCL to cover all margin obligations at all times
- One instance counted as breach when position limit exceeded; monitored on end-of-day basis
- Participants responsible for closing out positions in violation to avoid continued non-compliance
- All penalties subject to applicable taxes and charges
Important Dates
- Notice Date: October 20, 2025
- Effective Date: Immediate (upon circular issuance)
- Penalty cycle: Monthly basis for both position limit and margin violations
- Reference circular being modified: ICCL circular no. 20201223-69 dated December 23, 2020
Impact Assessment
Market Impact: High - affects all SLB participants’ operational and compliance frameworks. The tiered penalty structure incentivizes immediate rectification of violations while providing leniency for first-time breaches.
Operational Impact: SLB participants need to strengthen monitoring systems for real-time position tracking and margin adequacy to avoid penalties. The escalation mechanism to Member Committee for repeated violations (11+ instances) poses reputational and operational risks.
Financial Impact: Direct cost implications through monetary penalties and daily charges on margin violations. The 0.07% per day charge on margin shortfalls can accumulate significantly if violations persist.
Risk Management: Enhanced compliance requirements necessitate robust risk management systems to prevent breaches at multiple levels (member, financial institution, client). Disablement from transacting in SLB segment during margin violations creates operational constraints.
Impact Justification
Critical regulatory change affecting all SLB participants with financial penalties and potential referral to Member Committee for non-compliance with position limits and margin requirements