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Transaction in Government Securities
IDMC.
PDRS No. 5039 - 03.64.00 - dated 20th May 2002
Reserve
Bank of India, has been, over a period of time, encouraging holding of
government securities in the dematerialised mode in the following ways:
a)
All entities having a Subsidiary General Ledger (SGL) account with RBI
are allowed to open Constituent Subsidiary General Ledger (CSGL) accounts on
behalf of their clients.
b)
Although being non-banks, depositories (NSDL/ CDSL) and organisations
such as SHCIL have been provided an additional SGL account to open CSGL accounts
on behalf of their clients.
c)
The cost of postage incurred by the depositories on remitting interest
and redemption proceeds is being reimbursed by RBI so as to encourage
dematerialized holding and retail participation in Gilts.
d)
Guidelines have been issued to the banks prescribing the safeguards to be
adopted for maintenance of CSGL accounts.
e)
To impart transparency in government securities traded by clients
(through CSGL accounts), a special feature has been incorporated in the
Negotiated Dealing System (NDS) for reporting and settlement of such trades.
Provision has also been made in the NDS for giving quotes on behalf of clients
i.e. CSGL account holders.
2.
At present, as a result of above measures, 99% of the trading in
government securities takes place through SGL accounts with RBI for which the
Delivery versus Payment (DVP) system ensures simultaneous transfer of securities
against funds. Of the new issuances in 2001-02 of government securities, 99.9%
was in SGL form.
3.
In the light of recent fraudulent transactions in the guise of Government
securities transactions in physical format by a few co-operative banks with the
help of some broker entities, it is now proposed to accelerate the measures
under contemplation for further reducing the scope for trading in physical form.
The measures are as follows of RRBs)) and SHCIL or in a dematerialised account
with depositories (NSDL/ CDSL).
(i)
Only one CSGL or dematerialised account can be opened by any such entity.
(ii)
In case the CSGL accounts are opened with a scheduled commercial bank or
State Cooperative bank, the account holder has to open a designated funds
account (for all CSGL related transactions) with the same bank.
(iii)
In case a CSGL account is opened with any of the non-banking institutions
indicated above, the particulars of the designated funds account (with a bank)
should be intimated to that institution.
(iv)
The entities maintaining the CSGL/designated funds accounts will be
required to ensure availability of clear funds in the designated funds accounts
for purchases and of sufficient securities in the CSGL account for sales before
putting through the transactions.
(v)
No further transactions by a regulated entity should be undertaken in
physical form with any broker with immediate effect.
4.
A specific timetable is being separately indicated for each category of
regulated entities to comply with these guidelines. Those who have genuine
difficulties in meeting the timetable may approach the concerned regulatory
department in RBI for considering extension of dates for compliance.
5.
Any regulated entity, which requires help in this regard, may approach
Self Regulatory Organisations who are equipped to tender advice in this regard.
These are Primary Dealers Association of India (PDAI) {telephone nos. (022)-
2611094/ 2610852 � Extn. 127 (helpdesk@ pdaindia.org)} or the Fixed Income and
Money Market Derivatives Association of India (FIMMDA) {telephone nos. (022)-
2025729. (Email: [email protected])}
6.
Detailed instructions are being issued in regard to the above by the
concerned regulatory departments.
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