IST,
Transactions in Government Securities
Reserve Bank of India
Public Debt Office
Mumbai
P.D.O.19.01.02/ /2002-03
August 6, 2002
All SGL Account Holders / Stock Certificate Holders,
Reserve Bank of India,
Public Debt Office,
Mumbai
Dear Sir/s,
Transactions in Government Securities
As you are aware, over a period of time, Reserve Bank of India has been encouraging holding of Government Securities in the dematerialized mode and to facilitate the same it has made the following arrangements.
> All entities having a Subsidiary General Ledger (SGL) Account with Reserve Bank of India are allowed to open an additional account for their clients' transactions in Government Securities.
> Although being non banks, depositories ( NSDL/CSDL) and organizations such as SHCIL have been provided a facility of an additional SGL Account to open CSGL Account on behalf of their clients.
> 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 been made in the NDS for giving quotes on behalf of clients i.e. CSGL Account holders.
In the light of the recent fraudulent transactions in Government Securities in physical form by a few Co-operative banks with the help of some broker entities, it has been decided to accelerate the measures under contemplation for further reducing the scope for trading in physical form as under:
> All entities regulated by Reserve Bank of India should necessarily hold their investments in Government Securities portfolio in either SGL (with R.B.I) or CSGL [with a Scheduled Commercial Bank / State Co-operative Bank / Primary Dealer / Financial Institutions / Sponsor Banks (in case of Regional Rural Banks) and Stock Holding Corporation of India Ltd. or in a dematerialized account with depositories (National Securities Depository Ltd. / Central Depository Services Ltd.).
> Only one CSGL or dematerialized account can be opened by any such entity.
> In case the CSGL Accounts are opened with a scheduled commercial bank or State Co-operative bank, the account holder has to open a designated funds account ( for all CSGL related transactions ) with the same bank.
> 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.
> The entities maintaining the CSGL / designated funds accounts will be required to ensure availability of clear funds in the designated funds accounts for purchases of sufficient securities in the CSGL account for sales before putting through the transactions.
> A R.B.I. regulated entity should not with immediate effect undertake Government Securities transaction in the physical form with any broker.
In this connection your attention is also invited to the under noted circulars where applicable issued by the regulatory departments.
(i) Circular IDMC.PDRS.No5039.03.64.00/2001-02 dated 20th May 2002 issued by the Internal Debt Management Cell.
(ii) Circular RPCD.RF.BC.97 & 98/07.37.02/2001-02 dated 30th May 2002 issued by the Rural Planning & Credit Department.
(iii) Circular UBD No. BR 47/16.26.00/2001-02 dated 7th June 2002 issued by the Urban Banks Department; and
(iv) Circular DBS.FID.No.C-2/01.02.00/2002-03 dated 18th July 2002 issued by the Department of Banking Supervision.
You may take note of the above arrangements / guidelines and act accordingly. The SGL Account holders may also note to guide their constituents suitably in the matter. While the SGL Account holders and all the Reserve Bank of India regulated entities holding Government Securities in the form of Book Debt Certificates or Government Promissory Note form should ensure compliance to the above directions before the 31st August 2002, other non-regulated entities are advised to follow suit in their own interest and for smooth conduct of Government Securities transactions.
Yours faithfully,
(Jasbir Singh)
General Manager (Banking)
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