FINANCE CURRENT AFFAIRS – RBI 247

MAY DAY 6
TABLE OF CONTENT

1. Testing Framework for IT systems of MIIs

2. LEI for issuers with outstanding listed

securities

3. Transition Bonds- Disclosure

requirements
 Testing Framework for IT system of MII

MII- Market Infrastructure Institutions

Stock exchanges, depositories and clearing
houses are all Market Infrastructure
Institutions and constitute a key part of the
nation's vital economic infrastructure.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Testing Framework for IT system of MII

MII- Market Infrastructure Institutions

❑ According to a panel set up (in 2010) under the
chairmanship of former RBI Governor Bimal Jalan, the
term ‘market infrastructure’ denotes such fundamental
facilities and systems serving the capital market.
❑ MIIs helps in optimal use of money in the economy and
fostered economic development.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Testing Framework for IT system of MII

Market Infrastructure Institutions- MIIs (i.e. Stock

Exchanges, Clearing Corporations and Depositories) are
systemically important institutions as they, inter-alia,
provide infrastructure necessary for the smooth and
uninterrupted functioning of the securities market

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Testing Framework for IT system of MII
Therefore, it is imperative to devise a comprehensive
testing framework to manage the IT systems/applications
of MIIs throughout their lifecycle, which can assist the MIIs
in performing thorough risk assessment before deploying
any IT systems in production/ live environment.
Based on the recommendations of the Technology
Advisory Committee (TAC), MIIs are directed to ensure the
following requirements while establishing the testing
framework of their IT systems/applications: -
9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Testing Framework for IT system of MII

a) All MIIs should do extensive testing, validation and documentation

whenever new systems/ applications or changes to existing
systems/applications are introduced before the deployment in
production/live environment.

b) A comprehensive methodology for system testing, functional testing,

application security testing should be established and the same shall be
approved by Standing Committee on Technology (SCOT) of respective
MIIs.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Testing Framework for IT system of MII

c) All MIIs shall establish policy/procedures on the use of third

party systems/applications/software codes to ensure these systems are
subject to review and testing before they are integrated with the systems
of the MIIs.

d) All MIIs should perform regression testing for changes (e.g.

enhancement, rectification, etc.) to an existing IT system to validate that
it continues to function properly after the changes have been
implemented. After fixing the defects found during the testing, all MIIs
shall perform regression testing again to ensure that other

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Testing Framework for IT system of MII

e) All Issues identified from testing, including system defects or software

bugs, should be properly tracked and remediated immediately. Major
issues that could have an adverse impact on the MII should be reported
to their SCOT and addressed prior to deployment to the production
environment.
f) All MIIs should ensure that the results of all testing, including
results of User Acceptance Testing (UAT), that was conducted, are
documented in the test report. The same shall be checked by the auditor
during System and Network Audit.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 LEI for issuers with listed securities

❑ LEI is a unique global identifier for legal entities participating

in financial transactions.
❑ LEI is designed to create a global reference data system that
uniquely identifies every legal entity, in any jurisdiction, that is
party to a financial transaction.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 LEI for issuers with listed securities

❑ Itis a unique20-character code to identify legally distinct

entities that engage in financial transactions.

❑ Presently, RBI directions, mandate non-individual borrowers

having aggregate exposure of above Rs. 5 crores, to obtain
LEI code.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 LEI for issuers with listed securities

❑ Issuers having outstanding listed non-convertible securities

as on August 31, 2023, shall report/ obtain and report the LEI
code in the Centralized Database of corporate bonds, on or
before September 1, 2023.
❑ Similarly, issuers having outstanding listed securitised debt
instruments and security receipts as on August 31, 2023,
shall report/ obtain and report the LEI code to the
Depository(ies), on or before September 1, 2023

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 LEI for issuers with listed securities
Guidelines on LEI are extended to Primary (Urban) Co-operative
Banks (UCBs) and Non-Banking Financial Companies (NBFCs).

Non-individual borrowers enjoying aggregate exposure of ₹5 crore

and above from banks1 and financial institutions (FIs)2 shall be
required to obtain LEI codes
Total Exposure LEI to be obtained on or before
Above ₹25 crore April 30, 2023
Above ₹10 crore, up to ₹25 crore April 30, 2024
₹5 crore and above, up to ₹10
April 30, 2025
crore

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 LEI for issuers with listed securities

Entities can obtain LEI from any of the Local Operating Units
(LOUs) accredited by the Global Legal Entity Identifier
Foundation (GLEIF) – the entity tasked to support the
implementation and use of LEI.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 LEI for issuers with listed securities

In India, LEI code may be obtained from Legal Entity Identifier

India Ltd (LEIIL), a subsidiary of the Clearing Corporation of India
Limited (CCIL), which has been recognised by the RBI as issuer of
LEI under the Payment and Settlement Systems Act, 2007 and is
accredited by the GLEIF as the Local Operating Unit (LOU) in India
for issuance and management of LEI.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Transition Bonds

On February 2, 2023, the revised definition of ‘green debt

security’was notified in the SEBI(Issue and Listing of
Non-Convertible Securities)Regulations, 2021

Transition bonds’ is one of the sub categories of the revised definition

of ‘green debt security’. As per the SEBI transition bonds comprise of
“funds raised for transitioning to a more sustainable form of
operations, in line with India’s Intended Nationally Determined
Contributions.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Transition Bonds

In order to facilitate transparency and informed decision making

amongst the investors in the transition bonds and to ensure that the
funds raised through transition bonds are not being misallocated, it has
been decided to prescribe certain additional requirements for issuance
and listing of transition bonds.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Transition Bonds
Disclosure in the offer document for public issues
/private placements of such transition bonds:

❑ To differentiate transition bonds from other categories

of green debt security, Issuer of transition bonds shall
use a denotation ‘GB-T’.
❑ The denotation shall be disclosed in the offer
documents on the cover page and in type of
instrument field in the term sheet
9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Transition Bonds

Transition Plan, which shall contain the following:

(i)Details of interim targets*/ milestones along with an indicative

timeline for achieving the targets.*interim targets should also
reflect the indicative figure regarding how much emissions the
issuer is envisaging to reduce

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Transition Bonds

Transition Plan, which shall contain the following:

i)Brief of the project implementation strategy

(iii)Details regarding the usage of technology for the project

implementation
(iv)Mechanism to oversee the utilization of the funds raised
through transition bonds and the implementation of the
transition plan.
9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
 Transition Bonds

❑ SEBI also recommended issuers to form a committee to

oversee the implementation and ensure timely
completion of the defined targets.

❑ Stock exchanges have been directed to monitor such

continuous disclosures.

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in
Q.1) Which of the following is not part of market infrastructure institutions?
1. Stock exchanges
2. SEBI
3. Depositories
4. Clearing houses
5. NPO

[a] 1, 2 and 3 only

[b] 1, 2, 3 and 4 only
[c] 1,3 and 4 only
[d] 3 and 4 only
[e] 2 and 5 only
Q.2) Which of the following statement(s) is/are correct about legal entity
identifier?
1. RBI directions mandate non-individual borrowers having aggregate exposure
of above Rs. 5 crores.
2. Guidelines on LEI are not applicable to Primary (Urban) Co-operative Banks
(UCBs) and Non-Banking Financial Companies (NBFCs).
3. Borrowers who fail to obtain LEI codes from an authorized Local Operating
Unit (LOU) shall not be sanctioned any new exposure nor shall they be granted
renewal/enhancement of any existing exposure.

[a] 2 and 3 only

[b] 2 only
[c] 1 and 3 only
[d] 3 only
[e] 1 and 2 only
Q.3) Transition bond has recently been in news. With which of the following do
these bonds relate to?

[a] Subordinated bonds issued by banks

[b] Funds raised for transitioning to a more sustainable form of
operations
[c] Bonds converted into equity after 10 years
[d] Bonds which can be changed from fixed rate to floating rate
[e] Temporary bonds-available for buyback anytime
Q.4) According to a panel set up in ___ under the chairmanship of former _____
, the term ‘market infrastructure’ denotes such fundamental facilities and
systems serving the capital market.

[a] 2008, Bimal Jalan

[b] 2009, Nachiket Mor
[c] 2014, Madhabi Puri Buch
[d] 2010, Bimal jalan
[e] 2018, M. S Sahu
 Answers

❑ Question 1: [c]
❑ Question 2: [c]
❑ Question 3: [b]
❑ Question 4: [d]

9999466225 w w w. a n u j j i n d a l . i n info@anujjindal.in