8.1 There is an active secondary market in G-Secs. The securities can be bought / sold in the secondary market either through (i) Negotiated Dealing System-Order Matching (NDS-OM) (anonymous online trading) or through (ii) Over the Counter (OTC) and reported on NDS-OM or (iii) NDS-OM-Web (para 8.5) and (iv) Stock exchanges (para 8.6)

i. NDS-OM

In August 2005, RBI introduced an anonymous screen-based order matching module called NDS-OM. This is an order driven electronic system, where the participants can trade anonymously by placing their orders on the system or accepting the orders already placed by other participants. Anonymity ensures a level playing field for various categories of participants. NDS-OM is operated by the CCIL on behalf of the RBI (Please see answer to the question no.19 about CCIL). Direct access to the NDS-OM system is currently available only to select financial institutions like Commercial Banks, Primary Dealers, well managed and financially sound UCBs and NBFCs, etc. Other participants can access this system through their custodians i.e. with whom they maintain Gilt Accounts. The custodians place the orders on behalf of their customers. The advantages of NDS-OM are price transparency and better price discovery.

8.2 Gilt Account holders have been given indirect access to the reporting module of NDS-OM through custodian institutions.

8.3 Access to NDS-OM by the retail segment, comprising of individual investors having demat account with depositories viz. NSDL and/or CDSL, desirous of participating in the G-Sec market is facilitated by allowing them to use their demat accounts for their transactions and holdings in G-Sec. This access would be facilitated through any of the existing NDS-OM primary members, who also act as Depository Participants for NSDL and/or CDSL. The scheme seeks to facilitate efficient access to retail individual investor to the same G-Sec market being used by the large institutional investor in a seamless manner.

ii. Over the Counter (OTC)/ Telephone Market

8.4 In the G-Sec market, a participant, who wants to buy or sell a G-Sec, may contact a bank / PD/financial institution either directly or through a broker registered with SEBI and negotiate price and quantity of security. Such negotiations are usually done on telephone and a deal may be struck if both counterparties agree on the amount and rate. In the case of a buyer, like an UCB wishing to buy a security, the bank's dealer (who is authorized by the bank to undertake transactions in G-Secs) may get in touch with other market participants over telephone and obtain quotes. Should a deal be struck, the bank should record the details of the trade in a deal slip (specimen given at Annex 5). The dealer must exercise due diligence with regard to the price quoted by verifying with available sources (See question number 14 for information on ascertaining the price of G-Secs). All trades undertaken in OTC market are reported on the Reported segment of NDS-OM within 15 minutes, the details of which are given under the question number 15.

iii. NDS-OM-Web

8.5 RBI has launched NDS-OM-Web on June 29, 2012 for facilitating direct participation of gilt account holders (GAH) on NDS-OM through their primary members (PM) (as risk controller only and not having any role in pricing of trade). The GAH have access to the same order book of NDS-OM as the PM. GAH are in a better position to control their orders (place/modify/cancel/hold/release) and have access to real time live quotes in the market. Since notifications of orders executed as well as various queries are available online to the GAH, they are better placed to manage their positions. Web based interface that leverages on the gilt accounts already maintained with the custodian Banks/PDs provides an operationally efficient system to retail participants. NDS OM Web is provided at no additional cost to its users. PMs, however, may recover the actual charges paid by them to CCIL for settlement of trades or any other charges like transaction cost, annual maintenance charges (AMC) etc. It has been made obligatory for the Primary Members to offer the NDS-OM-Web module to their constituent GAHs (excluding individual) for online trading in G-sec in the secondary market. Constituents not desirous of availing this facility may do so by opting out in writing. On the other hand, individual GAHs desirous of the NDS-OM-Web facility may be provided the web access only on specific request.

iv. Stock Exchanges

8.6 As advised by SEBI, the stock exchanges (like NSE, BSE, MCX) have been asked to create dedicated debt segment in their trading platforms. In compliance to this, stock exchanges have launched debt trading (G-Secs as also corporate bonds) segment which generally cater to the needs of retail investors. The process involved in trading of G-Secs in Demat form in stock exchanges is as follows:

a. The Gilt Account Holder (GAH), say XYZ provident fund, approaches his custodian bank, (say ABC), to convert its holding held by custodian bank in their CSGL account (to the extent he wishes to trade, say ₹ 10,000), into Demat form.

b. ABC reduces the GAH’s security balance by ₹ 10,000 and advises the depository of stock exchange (NSDL/CSDL) to increase XYZ’s Demat account by ₹ 10,000. ABC also advises to PDO, Mumbai to reduce its CSGL balance by ₹ 10,000 and increase the CSGL balance of NSDL/CSDL by ₹ 10,000.

c. NSDL/CSDL increases the Demat balance of XYZ by ₹ 10,000.

d. XYZ can now trade in G-Sec on stock exchange.

v. Regulations applicable to prevent abuse

8.7 RBI vide FMRD.FMSD.11/11.01.012/2018-19 dated March 15, 2019 issued directions to prevent abuse in markets regulated by RBI. The directions are applicable to all persons dealing in securities, money market instruments, foreign exchange instruments, derivatives or other instruments of like nature as specified from time to time.

vi. Guidelines for Value free transfer (VFT) of Government Securities

8.8 VFT of the government securities shall mean transfer of securities from one SGL/CSGL to another SGL/CSGL account, without consideration. Such transfers could be on account of posting of margins, inter-depository transfers of government securities arising from trades in exchanges between demat account holders of different depositories, gift/inheritance and change of custodians etc. VFT would also be required in the case of distribution of securities to the beneficiary demat/gilt accounts on allotment after participation in the non-competitive segment of the primary auction.

RBI vide notification IDMD.CDD.No.1241/11.02.001/2018-19 dated November 16, 2018 issued separate guidelines for VFT to enable more efficient operations in the Government securities market. Value Free Transfers between SGL/CSGL accounts not covered by these guidelines will require specific approval of the Reserve Bank. The guidelines prescribes list of permitted transactions for VFT and application for permission for VFT for any other purpose may be submitted to Public Debt Office, Mumbai Regional Office, RBI, Fort, Mumbai

Answer: Once an FDI always an FDI.

Sometimes loan is disbursed in installments, depending on the stages of completion of the housing project.  Pending final disbursement, you may be required to pay interest only on the portion of the loan disbursed. This interest called pre-EMI interest. Pre-EMI interest is payable every month from the date of each disbursement up to the date of commencement of EMI.

However, many banks offer a special facility whereby customers can choose the installments they wish to pay for under construction properties till the time the property is ready for possession. Anything paid over and above the interest by the customer goes towards Principal repayment. The customer benefits by starting EMI payment earlier and hence repays the loan faster. Please check with your banker whether this facility is available before availing of the loan.

Major players in the G-Secs market include commercial banks and PDs besides institutional investors like insurance companies. PDs play an important role as market makers in G-Secs market. A market maker provides firm two way quotes in the market i.e. both buy and sell executable quotes for the concerned securities. Other participants include co-operative banks, regional rural banks, mutual funds, provident and pension funds. Foreign Portfolio Investors (FPIs) are allowed to participate in the G-Secs market within the quantitative limits prescribed from time to time. Corporates also buy/ sell the G-Secs to manage their overall portfolio.

The security for a housing loan is typically a first mortgage of the property, normally by way of deposit of title deeds. Banks also sometimes ask for other collateral security as may be necessary. Some banks insist on margin / down payment (borrowers contribution to the creation of an asset) to be maintained / made also.

Collateral security assigned to your bank could be life insurance policies, the surrender value of which is set at a certain percentage to the loan amount, guarantees from solvent guarantors, pledge of shares/ securities and investments like KVP/ NSC etc. that are acceptable to your banker. Banks would also require you to ensure that the title to the property is free from any encumbrance. (i.e., there should not be any existing mortgage, loan or litigation, which is likely to affect the title to the property adversely).

Answer: As long as the foreign shareholding in the entity remains the same and there is no corporate action pursuant to the sector being brought under approval route, approval is not required.

While undertaking transactions in securities, UCBs should adhere to the instructions issued by the RBI. The guidelines on transactions in G-Secs by the UCBs have been codified in the master circular DCBR. BPD (PCB).MC.No. 4/16.20.000/2015-16 dated July 1, 2015 which is updated from time to time. This circular can also be accessed from the RBI website under the Notifications – Master circulars section. The important guidelines to be kept in view by the UCBs relate to formulation of an investment policy duly approved by their Board of Directors, defining objectives of the policy, authorities and procedures to put through deals, dealings through brokers, preparing panel of brokers and review thereof at annual intervals, and adherence to the prudential ceilings fixed for transacting through each of the brokers, etc.

The important Do’s & Don’ts are summarized in the Box I below.

BOX I Do’s & Don’ts for Dealing in G-Secs Do’s Segregate dealing and back-office functions. Officials deciding about purchase and sale transactions should be separate from those responsible for settlement and accounting. Monitor all transactions to see that delivery takes place on settlement day. The funds account and investment account should be reconciled on the same day before close of business. Keep a proper record of the SGL forms received/issued to facilitate counter-checking by their internal control systems/RBI inspectors/other auditors. Seek a Scheduled Commercial Bank (SCB), a PD or a Financial Institution (FI) as counterparty for transactions. Give preference for direct deals with counter parties. Insist on Delivery versus Payment for all transactions. Take advantage of the NCB facility for acquiring G-Secs in the primary auctions conducted by the RBI. Restrict the role of the broker only to that of bringing the two parties to the deal together, if a deal is put through with the help of broker. Have a list of approved brokers. Utilize only brokers registered with NSE or BSE or OTCEI for acting as intermediary. Place a limit of 5% of total transactions (both purchases and sales) entered into by a bank during a year as the aggregate upper contract limit for each of the approved brokers. A disproportionate part of the business should not be transacted with or through one or a few brokers. Maintain and transact in G-Secs only in dematerialized form in SGL Account or Gilt Account maintained with the CSGL Account holder. Open and maintain Gilt account or dematerialized account Open a funds account for securities transactions with the same Scheduled Commercial bank or the State Cooperative bank with whom the Gilt Account is maintained. Ensure availability of clear funds in the designated funds accounts for purchases and sufficient securities in the Gilt Account for sales before putting through the transactions. Observe prudential limits and abide by restrictions for investment in permitted non-SLR securities (Prudential limit : shall not exceed 10% of the total deposits of bank as on March 31 of the preceding financial year) ( Instruments : (i) “A” or equivalent and higher rated CPs, debentures and bonds, (ii) units of debt mutual funds and money market mutual funds, (iii) shares of market infrastructure companies eg. CCIL, NPCI, SWIFT). The Board of Directors to peruse all investment transactions at least once a month Don’ts Do not undertake any purchase/sale transactions with broking firms or other intermediaries on principal to principal basis. Do not use brokers in the settlement process at all, i.e., both funds settlement and delivery of securities should be done with the counter-parties directly. Do not give power of attorney or any other authorisation under any circumstances to brokers/intermediaries to deal on your behalf in the money and securities markets. Do not undertake G-Secs transaction in the physical form with any broker. Do not routinely make investments in non-SLR securities (e.g., corporate bonds, etc) issued by companies or bodies.