The Full Form of IBPC is Inter-Bank Participation Certificate.

Banks troubled with capital constraints sell their “excess baggage” of loans assets to other banks in the form of ‘Inter Bank Participation Certificate (IBPC).  These IBPC transactions are aimed to fill short-term requirements of banks and are typically bought back by the seller bank within three to four months, depending on the agreement.

Reserve Bank of India has permitted foreign banks and private sector banks to treat their investments in interbank participatory certificate (IBPC) to treat it as direct lending to the priority sector. A bank missing its target for priority sector lending target will be able to reach the target by buying IBPCs issued by the fellow banks that have already exceeded in achieving their regulatory targets of priority sector advances and issued IBPCs for excess of lending under various categories of priority sector.

There are two types of Inter-Bank Participation certificates (IBPCs); one on risk sharing basis and the other without risk sharing.  In case of IBPC without risk sharing, a bank missing the target can always buy IBPC instrument issued by another bank at a price for a month or so. Later, the seller bank can buy back the portfolio. The IBPC on risk sharing can be issued for 91-180 days and only in respect of advances classified under standard Status where the conduct of account is satisfactory, the safety of advance is not in doubt, and all the terms and conditions are complied with.  The aggregate amount of such IBPCs under any loan account at the time of issue is not to exceed 40 per cent of the outstanding in the account. RRBs can also issue Inter‐Bank Participation Certificates (IBPC) of a tenor of 180 days on risk sharing basis to scheduled commercial banks against their priority sector advances in excess of 60% of their outstanding advances