mumbai, Feb. 24 -- In the regulatory tussle over supervision of India's clearing houses, the European Union blinked first. Ending a three-year standoff over supervision of the Clearing Corp. of India Ltd (CCIL), the Reserve Bank of India (RBI) and the European Securities and Markets Authority (ESMA) signed a memorandum of understanding on 27 January. While the two regulators did not release the details of the agreement signed alongside the conclusion of India-EU free trade talks, ESMA has dropped its demand to supervise Clearing Corp. of India Ltd (CCIL), two people familiar with the development said. In May 2023, ESMA withdrew recognition of six Indian clearing houses, including CCIL, a move which threatened to raise costs for European banks using them for their trades. The dispute originated from differences between the RBI and ESMA over granting supervisory access to Indian clearing houses. "ESMA has agreed not to interfere with the supervision process of CCIL and will rely on RBI's expertise for that," said the first person. While five other clearing houses remain unrecognized by ESMA, there may be hope for them as well. ESMA said on 27 January that it is in talks with other regulators who supervise them. While the Securities and Exchange Board of India (Sebi) supervises the Indian Clearing Corp. Ltd, NSE Clearing Ltd, and Multi Commodity Exchange Clearing Corp; Gift City regulator International Financial Services Centres Authority (IFSCAI) supervises NSE IFSC Clearing Corp. Ltd and India International Clearing Corp. Ltd. Besides, the European regulator has also agreed to address the issue of CCIL being asked to apply for recognition. The person cited above said ESMA has agreed to take up India's concern on 'extraterritoriality' in the next edition of the European Market Infrastructure Regulation (EMIR) . "When that happens, the process of CCIL having to apply for recognition will not arise in the coming years. This will remove a key hurdle and allow CCIL to function without the overhang of being regulated by ESMA," the person added. This, the person said, will also ensure there is no interference in the functions of a regulator in one jurisdiction by one from another jurisdiction....