ABN Amro bags CCIL forex clearing mandate

BS Srinivasalu Reddy

Mumbai, Oct 14: Leading foreign bank ABN Amro has bagged the prestigious foreign exchange clearing mandate of the Clearing Corporation of India Ltd (CCIL), pipping equally renowned rivals like Citibank, Chase Manhattan and Bank of New York at the post.

This is the first step by CCIL in setting up a mechanism for the settlement of inter-bank forex deals for dollar transactions within the country, against the present system of settling the transactions in New York. This is expected to save hefty brokerages being paid in New York at present.

“CCIL has chosen ABN Amro Bank to act as their clearing agent for dollar-based forex transactions in the country. The bank will have an interface with the Federal Reserve of the US, on CCIL’s behalf,” sources told The Financial Express.

CCIL is expected to forward the name of ABN Amro Bank to the US Federal Reserve for acting on its behalf in settlement of dollar-based transactions in India. This would enable the bank to become a member of the Federal Wire Clearing System (FWCS) and get connectivity. Both the bank and CCIL would work out the strategy for development of an appropriate system interface between the CCIL and FWCS shortly.

When contacted, ABN Amro Bank’s country representative (India) Romesh Sobti confirmed bagging the mandate and said: “It’s a benchmark mandate. We are delighted to have bagged the mandate against stiff competition from big players in clearing operations.” Mr Sobti is also head of strategic value (consumer) businesses for Asia, Middle-East.

Reserve Bank of India (RBI) has already written to the Federal Reserve about the CCIL’s initiative and seeking the membership for FWCS for the bank which would be representing the clearing corporation. CCIL is still awaiting the approval of the Federal Reserve.

CCIL, which received applications from five reputed foreign banks with global spread in operations for the mandate, has applied competitive terms for in charges/fee and collateral requirements for overdraft facility, besides security in execution of transactions as the main criteria for selection of a partner for clearing operations.

Though CCIL is planning to kick off its operations in the debt market in November 2001, it is unlikely to simultaneously start operations in clearing forex transactions, the sources said. Some time-lag is required for setting up the systems and starting settlements as the partner has been selected now, they added. The inter-bank transactions in dollars would be linked to CCIL through the Infinet of the RBI.