April 29, 2002

DBS.FID.C-15 / 02.01.00/ 2001-2002

The Chief Executive Officers of
All-India Term Lending and Refinancing Institutions

Dear Sirs,

Issue of Certificates of Deposit (CDs) in dematerialised form

Please refer to the paragraph No 91 of the Governor’s statement on "Monetary and Credit Policy for the year 2002-03" announced on April 29, 2002 available in our website www.rbi.org.in (copy of the extract of paragraph No 91 enclosed). In accordance with the policy announcements, the following measure is being introduced with immediate effect.

2. The Reserve Bank of India has issued guidelines for Commercial Paper (CP) in consultation with the market players including the standard procedures and documentation to be followed by the participants in the Commercial Paper (CP) market. In April 2001, instructions were issued to banks and FIs that they should make investments and hold CPs only in the dematerialised form without prejudice to the provision of Depositories Act, 1996 and convert existing outstandings also into demat form by October 31, 2001. It has now been decided that standard procedures and guidelines for issuing Certificates of Deposit (CDs) may also be prepared for the benefit of issuers of CDs. Accordingly, Fixed Income Money Market and Derivatives Association (FIMMDA) has prepared the guidelines and documentation procedures in consultation with market participants, depositories and RBI. Pending release of final guidelines and as a further step towards transparency, it has been decided that with effect from June 30, 2002, FIs should issue CDs only in the dematerialised form. The existing outstandings of CDs shall be converted into the dematerialised form by October 2002.

3. Please acknowledge receipt.

Yours faithfully,

(K.C.Bandyopadhyay)
Chief General Manager

Enclrs : one sheet

An Extract of paragraph No.91 from the Statement by Dr. Bimal Jalan, Governor, Reserve Bank of India on Monetary and Credit Policy for the year 2002-03, announced on April 29, 2002.

Certificates of Deposit

91. Several developments in financial market have so far been undertaken by RBI, which include issuing of guidelines for Commercial Paper (CP) in consultation with the market players. Subsequently, Fixed Income Money Market and Derivatives Association (FIMMDA) was requested to prepare the necessary standard procedures and documentation to be followed by the participants in the CP market. Such guidelines were issued by FIMMDA in June 2001. Further, as announced in the annual policy Statement of April 2001, instructions were issued to banks and FIs that they should make investments and hold CPs only in the dematerialised form and convert existing outstandings also into demat form by October 31, 2001. It was felt that on similar lines standard procedures and guidelines for issuing Certificates of Deposit (CDs) may also be prepared for the benefit of issuers of CDs. Accordingly, FIMMDA has prepared the guidelines and documentation procedures in consultation with market participants, depositories and RBI. Pending release of final guidelines and as a further step towards transparency, it has been decided that:

• With effect from June 30, 2002, banks and FIs should issue CDs only in the dematerialised form. The existing outstandings of CDs shall be converted into the demat form by October 2002.