RBI/2011-12/326
A. P. (DIR Series) Circular No.63

December 29, 2011

To

All Category-I Authorised Dealer Banks

Madam / Sir,

External Commercial Borrowings (ECB) denominated in Indian Rupees (INR) - hedging facilities for non-resident entities

Attention of Authorized Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA 25/RB-2000 dated May 3, 2000], as amended from time to time.

2. In terms of A.P. (Dir Series) Circular No. 27 dated September 23, 2011,

i. “eligible borrowers” have been permitted to avail of ECBs designated in INR from foreign equity holders under the automatic/ approval route, as the case may be, as per the extant ECB guidelines.

ii. NGOs engaged in microfinance activities have been permitted to avail of ECBs designated in INR, under the automatic route, from overseas organisations and individuals as per the extant ECB guidelines.

In order to facilitate the same, it has been decided to allow non-residents to hedge their currency risk in respect of ECBs denominated in Indian Rupees, with AD Category I banks in India, as per the details given in the Annex.

3. Necessary amendments to the Notification No. FEMA.25/RB-2000 dated May 3, 2000 [Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000] are being notified separately.

4. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers.

5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Yours faithfully,

(Meena Hemchandra)
Chief General Manager-in-Charge

Annex
 [Annex to A.P. DIR Circular No.63
dated December 29, 2011]

ECBs denominated in INR - Hedging Facilities for Non-Resident Entities

Purpose

To hedge the currency risk arising out of ECBs designated in INR with AD Category- I banks in India.

Products

Forward foreign exchange contracts with rupee as one of the currencies, foreign currency-INR options and foreign currency-INR swaps.

Operational Guidelines, Terms and Conditions

• The foreign equity holder / overseas organisation or individual approaches the AD bank in India with a request for forward cover in respect of underlying transaction for which he needs to furnish appropriate documentation (scanned copies would be acceptable), on a pre-deal basis to enable the AD bank in India to satisfy itself that there is an underlying ECB transaction, and details of his overseas banker, address, etc. The following undertakings also need to be taken from the customer -

  o That the same underlying exposure has not been hedged with any other AD Category- I bank/s in India.

  o If the underlying exposure is cancelled, the customer will cancel the hedge contract immediately.

• The amount and tenor of the hedge should not exceed that of the underlying transaction and should be in consonance with the extant regulations regarding tenor of payment / realization of the proceeds.

• On due date, settlement is to be done through the correspondent bank’s Vostro or the AD bank’s Nostro accounts. AD banks in India may release funds to the beneficiaries only after sighting funds in Nostro / Vostro accounts.

• The contracts, once cancelled, cannot be rebooked.

• The contracts may, however, be rolled over on or before maturity subject to maturity of the underlying exposure.

• On cancellation of the contracts, gains may be passed on to the customer subject to the customer providing a declaration that he is not going to rebook the contract or that the contract has been cancelled on account of cancellation of the underlying exposure.

RBI/2011-12/325
RPCD.CO.RCB.Dir.BC.No.49 /07.38.01/2011-12

December 28, 2011

All State and Central Co-operative Banks

Dear Sir/Madam,

Deregulation of Interest Rates on Non-Resident (External)
Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts

Please refer to paragraph 1 of our circular RPCD.CO.RCB.BC.No.38/ 07.38.01/2011-12 dated November 24, 2011 on Interest Rates on Non-Resident (External) Rupee (NRE) Deposits and paragraph 2 of our circular RPCD.CO.RCB.BC.No.65/ 07.38.01/2010-11 dated May 3, 2011 on Interest Rates on Deposits.

2. With a view to providing greater flexibility to banks in mobilising non-resident deposits and also in view of the prevailing market conditions, it has been decided to deregulate interest rates on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts (the interest rates on term deposits under Ordinary Non-Resident (NRO) Accounts are already deregulated). Accordingly, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with immediate effect. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

3. Prior approval of the Board/Asset Liability Management Committee (if powers are delegated by the Board) may be obtained by a bank while fixing interest rates on such deposits. At any point of time, individual banks should offer uniform rates at all their branches.

4. The revised deposit rates will apply only to fresh deposits and on renewal of maturing deposits. Further, banks should closely monitor their external liability arising on account of such deregulation and ensure asset-liability compatibility from systemic risk point of view.

5. An amending directive RPCD.CO.RCB.Dir.BC.No.48/07.38.01/2011-12 dated December 28, 2011 is enclosed.

Yours faithfully,

(C.D.Srinivasan)
Chief General Manager

RPCD.CO.RCB.Dir.BC. No.48/07.38.01/2011-12

December 28, 2011

Deregulation of Interest Rates on Non-Resident (External)
Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) and in modification of the directive RPCD.CO.RCB.BC.Dir.No.37/07.38.01/2011-12 dated November 24, 2011 on Interest Rates on Non-Resident (External) (NRE) Deposits and RPCD.CO.RCB.BC.Dir.No.64/07.38.01/2010-11 dated May 3, 2011 on Interest Rates on Deposits, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby directs that State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs) are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with immediate effect. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

(V.K.Sharma)
Executive Director

RBI/2011-12/323
UBD.BPD.(PCB)CIR No. 16/13.01.000/2011-12

December 28,  2011

The Chief Executive Officers
All Primary (Urban) Co-operative Banks

Dear Sir/Madam,

Deregulation of Interest Rates on Non-Resident (External)
Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts

Please refer to our  circular  UBD.BPD.(PCB)CIR No.12/13.01.000/2011-12 dated November 24, 2011  on Interest Rates on Non-Resident (External) Rupee (NRE) Deposits and paragraph 4 of our circular UBD.BPD.(PCB) CIR. No.13 /13.01.000/2011-12    dated November 25, 2011 on Deregulation of Savings Bank Deposit Interest Rate.

2. With a view to providing greater flexibility to banks in mobilising non-resident deposits and also in view of the prevailing market conditions, it has been decided to deregulate interest rates on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO)  Deposit Accounts (the interest rates on term deposits under Ordinary Non-Resident (NRO) Accounts are already deregulated). Accordingly, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with immediate effect. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

3. Prior approval of the Board/Asset Liability Management Committee (if powers are delegated by the Board) may be obtained by  banks while fixing interest rates on such deposits. At any point of time, individual banks should offer uniform rates at all their branches.

4. The revised deposit rates will apply only to fresh deposits and on renewal of maturing deposits. Further, banks should closely monitor their external liability arising on account of such deregulation and ensure asset-liability compatibility from systemic risk point of view.

5. An amending directive UBD.BPD.DIR. No. 5/13.01.000/2011-12 dated December 28, 2011 is enclosed.

Yours faithfully,

(A.Udgata)
Chief General Manager-in-Charge

Encl: As above.

UBD.BPD.DIR. No.   5  /13.01.000/2011-12

December  28, 2011

Deregulation of Interest Rates on Non-Resident (External)
Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts

In exercise of the powers conferred by Section 35A read with Section 56 of the Banking Regulation Act, 1949, and in modification of the directive UBD.BPD.DIR.No.2 /13.01.000/2011-12 dated November 23, 2011 on Interest Rates on Non-Resident (External) (NRE) Deposits and in continuation of the directive UBD.BPD.DIR.No.4 /13.01.000/2011-12  dated November 25, 2011 on Deregulation of Savings Bank Deposit Interest Rate, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby directs that banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with immediate effect. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

(S. Karuppasamy)
Executive Director

RBI/2011-12/324
IDMD.PCD. 14 /14.03.07/2011-12

December 28, 2011

All market participants

Dear Sir/Madam

Secondary market transactions in Government Securities - Short Selling

This has reference to circulars IDMD.03/11.01.01(B)/2005-06 dated February 28, 2006, RBI/2006-07/243 dated January 31, 2007 and IDMD.DOD.3165/ 11.01.01(B)/2007-08 dated January 01, 2008 on the captioned subject.

2. As you are aware, the period of maintenance of short position in G-Sec was extended beyond intraday to five trading days vide circular RBI/2006-07/243 dated January 31, 2007. In continuation, as announced in the Monetary Policy Statement 2011-12, it has been decided to extend the period of Short Sale from the existing five days to a maximum period of three months (including the day of trade), effective from February 1, 2012.

3. Participants undertaking short sale transactions and the related cover transactions shall indicate the same in NDS-OM appropriately. Similarly, the cover transaction, when undertaken in the OTC market, shall be tagged during reporting of the trade in the NDS. In this regard, it is clarified that the ‘short sale’ tag in NDS-OM shall not be used to put through ‘sell’ trades of securities that are not in immediate possession of the participant/dealer (i.e., securities lying in IDL a/c, with CCIL as margin, not available with a particular dealer, etc.).

4. It was indicated vide circular RBI/2006-07/243 dated January 31, 2007 (para 3) that short positions shall be covered only by outright purchase of an equivalent amount of the same security. In this regard, participants, in addition to covering their short positions through outright purchase, may also cover the same through a long position in the When Issued (WI) market or allotment in the primary auction. However, participants may note that the closure of the long position in WI market (by sale of the WI securities) would lead to a reestablishment of short position to the extent of the sale in the WI market.

5. Participants undertaking ‘notional’ short sales shall cover the short position through any of the means indicated at para 4 above and not use securities from their AFS/HTM portfolio for delivery against the short sale.

6. Participants shall ensure that the statement of stock balance in NDS-OM is verified and reconciled with the statements of the various securities account, i.e., SGL A/c, CSGL A/c, IDL A/c, etc. by the concurrent auditors on a daily basis. In this regard, the concurrent auditors shall examine and ensure that any manual updation of stock balances in NDS-OM (due to transactions outside NDS-OM) is reflected in the SGL/CSGL account of the participant.

7. Participants undertaking short selling should ensure that these transactions are in conformity with fair market practices and are conducted in a transparent manner. In this connection, participants may review their systems and controls to ensure that the same are appropriate to prevent market abuse (like use of insider information, spreading of false or misleading information, distortion of the price-discovery mechanism, etc. for personal gains) and is complied with by their employees. Further, participants shall also report to RBI any suspected cases of market abuse regardless of whether it was by their own employee, client or other market participant.

8. Participants undertaking short selling shall submit a monthly report on their short selling activity, duly certified by the concurrent/internal auditors that there were no violations of extant regulatory guidelines on short sale in G-Sec, to the Chief General Manager, Reserve Bank of India, Financial Markets Department, 24th Floor, Fort, Mumbai - 400001 as per the enclosed format (Annex). The monthly statement (in excel format) shall also be emailed .

9.  All other terms and conditions contained in the aforementioned circulars remain unchanged.

Yours faithfully

(Sanjay Hansda)
Director & Officer-in-Charge

Annex

RBI/2011-12/322
DBOD.Dir.BC. 68 /13.03.00/2011-12

December 27, 2011

All Scheduled Commercial Banks
(excluding RRBs)

Dear Sir / Madam

Banks' Exposure to Capital Market -
Issue of Irrevocable Payment Commitments (IPCs)

Please refer to our circulars No.DBOD.Dir.BC.46/13.03.00/2010-11 dated September 30, 2010, DBOD.Dir.BC.52/13.03.00/2010-11dated October 28, 2010 and DBOD.Dir.BC.43/13.03.00/2011-12 dated October 31, 2011 wherein banks issuing Irrevocable Payment Commitments (IPCs) to various Stock Exchanges on behalf of Mutual Funds and FIIs had been advised to adopt the following risk mitigation measures:

1. Only those custodian banks, who have a clause in the Agreement with their clients which gives them an inalienable right over the securities to be received as pay out in any settlement, would be permitted to issue IPCs. However, in cases where transactions are pre-funded i.e. there are clear INR funds in the customer’s account and, in case of FX deals, the bank’s nostro account has been credited before the issuance of the IPC by custodian banks, the requirement of the clause of inalienable right over the security to be received as pay out in the agreement with the clients will not be insisted upon.

2. The maximum risk to the custodian banks issuing IPCs would be reckoned at 50%, on the assumption of downward price movement of the equities bought by FIIs/ Mutual Funds on the two successive days from the trade date (T) i.e., on T+1 and T+2, of 20% each with an additional margin of 10% for further downward movement.

3. Accordingly the potential risk on T+1 would be reckoned at 50% of the settlement amount and this amount would be reckoned as CME at the end of T+1 if margin payment / early pay in does not come in.

4. In case there is early pay in on T+1, there will be no Capital Market exposure. By T+1, we mean ‘end of day’ (EOD) as per Indian Time.  Thus, funds received after EOD as per Indian Time, will not be reckoned as early pay-in on T+1. CME will have to be computed accordingly.

5. In case margin is paid in cash on T+1, the CME would be reckoned at 50% of settlement price minus the margin paid. In case margin is paid on T+1 by way of permitted securities to FIIs / Mutual Funds, the CME would be reckoned at 50% of settlement price minus the margin paid plus haircut prescribed by the Exchange on the securities tendered towards margin payment.

6. The IPC will be treated as a financial guarantee with a Credit Conversion Factor (CCF) of 100.    However, capital will have to be maintained only on exposure which is reckoned as CME and the risk weight would be 125% thereon.

2.  It has now been decided that the above mentioned arrangements will continue to be in force until further review.

Yours faithfully,

(P. R. Ravi Mohan)
Chief General Manager

RBI/2011-12/321
DBOD.No.BP.BC. 69 /21.06.001/2011-12

December 27, 2011

The Chairman and Managing Directors/
Chief Executive Officers of
All Scheduled Commercial Banks
(Excluding RRBs and LABs)

Dear Sir,

Capital Requirement for banks’ investments in financial entities exempted from Capital Market Exposure

Please refer to paragraph 5.13.4 of our Master Circular No. DBOD.No.BP.BC.11/ 21.06.001/2010-11 dated July 1, 2011 on Prudential Guidelines on Capital Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF), as per which capital market exposure will attract a 125 percent risk weight or risk weight warranted by external rating (or lack of it) of the counterparty, whichever is higher. However, in terms of paragraph 5.13.7 of the said circular, the investment in paid up equity of financial entities, which are specifically exempted from 'capital market exposure' (CME), shall be assigned a 100 percent risk weight.

2. The matter has been reviewed and it has been decided that the risk weight and capital requirement should be linked to risk characteristics of the investment, irrespective of whether they are exempted from CME or not. Therefore, banks’ investments in paid up equity of financial entities, even if they are exempted from CME norms, will henceforth be assigned a 125 percent risk weight or risk weight warranted by external rating (or lack of it) of the counterparty, whichever is higher, as prescribed in paragraph 5.13.4 of the above mentioned circular.

3. Accordingly, banks’ capital market investments in banking book, including those exempted from CME norms, will attract risk weight of 125 percent (i.e. 11.25 percent of capital charge on gross equity position) or as per the risk weight warranted by external rating (or lack of it) of the counterparty, whichever is higher. However, if such investments are in trading book, they will attract capital charge of 20.25 percent or higher [i.e. capital charge towards specific risk at 11.25 percent or as per the risk weight warranted by external rating (or lack of it) of the counterparty, whichever is higher and general market risk at 9 percent of gross equity position].

4. This instruction will be applicable from January 1, 2012.

Yours faithfully,

(Deepak Singhal)
Chief General Manager-in-Charge

RBI/2011-12/320
DPSS.CO.CHD.No./ 1112 / 04.07.05 / 2011-12

December 27, 2011

The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs /
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks

Madam / Dear Sir,

Standardisation and Enhancement of Security Features in Cheque Forms-Implementation of CTS 2010 standard

A reference is invited to our circular No.DPSS.CO.CHD.No. 1832 / 04.07.05 / 2009-10 February 22, 2010 prescribing the new cheque standards "CTS-2010” and advising banks to be in readiness for rolling out the new standards at an early date. Further, Indian Banks Association (IBA) and National Payment Corporation of India (NPCI) were vested with the responsibility of coordinating and implementing the uniform cheque standard across the country by all participating banks.

2. The introduction of new cheque standards 'CTS 2010' was warranted on account of several developments in the cheque clearing viz. growing use of multi-city and payable-at-par cheques at any branch of a bank, increasing popularity of Speed Clearing for local processing of outstation cheques and implementation of grid based Cheque Truncation System (CTS) for image-based cheque processing etc.

3. The new cheque standard "CTS 2010" with set of minimum security features would ensure uniformity across all cheque forms issued by banks in the country and also help presenting banks while scrutinising / recognising cheques of drawee banks in an image-based processing scenario. The homogeneity in security features is expected to act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straight-through-processing both under CTS and MICR clearing.

4. As you are aware, the grid based CTS at Chennai has already been operationalised with effect from September, 2011. Shortly, the grid based CTS at Chennai and New Delhi would be expanded to cover the clearing centres falling under both the grids. It has been reported that majority of the cheque issuing banks have been certified as CTS-2010 compliant by NPCI and there have been requests from participating banks in CTS for prescribing a cut-off date for total migration to ‘CTS 2010 standard’.

5. Considering the above developments and the time already given to banks for migrating to the new cheque standard, it has since been decided to prescribe a cut-off date for implement the ‘CTS-2010 standards’ across the country. All banks providing cheque facility to their customers, are, therefore, advised to issue only 'CTS-2010' standard cheques not later than April 1, 2012 on priority basis in northern and southern region which will be part of the northern and southern CTS grids respectively and across the country by September 30, 2012 through a time bound action plan.

6. The above instructions are issued in terms of section 18 of the Payment and Settlement Systems Act 2007(Act 51 of 2007).

7. Please acknowledge receipt and confirm that you have put in place a plan for implementing the "CTS-2010 standard” within the prescribed timeline.

Yours faithfully,

(Vijay Chugh)
Chief General Manager

RBI/2011-12/318
A. P. (DIR Series) Circular No.61

December 27, 2011

To
     All Category-I Authorised Dealer Banks

Madam / Sir,

Exim Bank's Line of Credit of USD 40 million
to the Government of the Republic of Maldives

Export-Import Bank of India (Exim Bank) has concluded an Agreement dated August 12, 2011 with the Government of the Republic of Maldives, making available to the latter, a Line of Credit (LOC) of USD 40 million (USD forty million) for financing eligible goods, services, machinery and equipment including consultancy services to be exported from India for the purpose of financing the construction of 500 housing units in Maldives. The goods, services, machinery and equipment including consultancy services from India for exports under this Agreement are those which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this Agreement. Out of the total credit by Exim Bank under this Agreement, the goods and services including consultancy services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent goods and services (other than consultancy services) may be procured by the seller for the purpose of Eligible Contract from outside India.

2.      The Credit Agreement under the LOC is effective from October 25, 2011 and the date of execution of Agreement is August 12, 2011. Under the LOC, the last date for opening of Letters of Credit and Disbursement will be 48 months from the scheduled completion date(s) of contract(s) in the case of project exports and 72 months (August 11, 2017) from the execution date of the Credit Agreement in the case of supply contracts.

3.      Shipments under the LOC will have to be declared on GR / SDF Forms as per instructions issued by the Reserve Bank from time to time.

4.      No agency commission is payable under the above LOC. However, if required, the exporter may use his own resources or utilize balances in his Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- l (AD Category-l) banks may allow such remittance after realization of full payment of contract value subject to compliance with the prevailing instructions for payment of agency commission. 

5.      AD Category-I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain full details of the Line of Credit from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005  or log on to www.eximbankindia.in.

6.     The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Rashmi Fauzdar)
Chief General Manager

RBI/2011-12/319
A. P. (DIR Series) Circular No.62

December 27, 2011

To

All Category-I Authorised Dealer Banks

Madam / Sir,

Exim Bank's Line of Credit of USD 168 million
to the Government of the Democratic Republic of Congo

Export-Import Bank of India (Exim Bank) has concluded an Agreement dated July 11, 2011 with the Government of the Democratic Republic of Congo, making available to the latter, a Line of Credit (LOC) of USD 168 million (USD one hundred sixty eight million) for financing eligible goods, services, machinery and equipment including consultancy services to be exported from India for the purpose of financing Ketende Hydro-electric Project in Congo. The goods, services, machinery and equipment including consultancy services from India for exports under this Agreement are those which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this Agreement. Out of the total credit by Exim Bank under this Agreement, the goods and services including consultancy services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 per cent goods and services (other than consultancy services) may be procured by the seller for the purpose of Eligible Contract from outside India.

2. The Credit Agreement under the LOC is effective from October 20, 2011 and the date of execution of Agreement is July 11, 2011. Under the LOC, the last date for opening of Letters of Credit and Disbursement will be 48 months from the scheduled completion date(s) of contract(s) in the case of project exports and 72 months (July 10, 2017) from the execution date of the Credit Agreement in the case of supply contracts.

3. Shipments under the LOC will have to be declared on GR / SDF Forms as per instructions issued by the Reserve Bank from time to time.

4. No agency commission is payable under the above LOC. However, if required, the exporter may use his own resources or utilize balances in his Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- l (AD Category-l) banks may allow such remittance after realization of full payment of contract value subject to compliance with the prevailing instructions for payment of agency commission.

5. AD Category-I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain full details of the Line of Credit from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005  or log on to www.eximbankindia.in.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Rashmi Fauzdar)
Chief General Manager

Ref.No.IDMD / 2595 /08.02.032/2011-12

December 26, 2011

All Scheduled Commercial Banks /
All State Co-operative Banks/All Scheduled Primary
(Urban) Co-operative Banks /All Financial Institutions/
All Primary Dealers

Dear Sir,

Auction of Government of India Dated Securities

Government of India have offered to sell (re-issue) (a) “7.99 percent  Government Stock 2017 ” for a notified amount of Rs.3,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(4)-W&M/2011 dated December 26, 2011; (b) “9.15 percent  Government Stock 2024 for a notified amount of Rs.6,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(4)-W&M/2011(i) dated December 26, 2011 (C) “8.28 percent  Government Stock 2027 ” for a notified amount of Rs.3,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(4)-W&M/2011(ii) dated December 26, 2011; and (D) “8.83 percent Government Stock 2041” for a notified amount of Rs. 3,000 crore (nominal) through a price based auction using uniform price method vide Notification No.4(4)-W&M/2011(iii) dated December 26, 2011.  The Reserve Bank of India at Mumbai will conduct the auctions on December 30, 2011. The salient features of the auctions and the terms and conditions governing the issue of the Stocks are given in the Notifications (copies enclosed), which should be read along with the General Notification F. No. 4 (13)–W&M/2008, dated October 8, 2008 issued by Government of India.

2. We wish to draw your attention, in particular, to the following:

1. The Stocks will be issued for a minimum amount of Rs.10,000/- (nominal) and in multiples of Rs.10,000/- thereafter.

2. In all the auctions, Government Stock up to 5% of the notified amount of sale will be allotted to the eligible individuals and institutions under the Scheme for Non-competitive Bidding Facility in the Auctions of Government Securities [enclosed with the notifications F. No.4 (4)-W&M/2011, F. No.4 (4)-W&M/2011(i), F. No.4 (4)-W&M/2011(ii)  and F. No.4 (4)-W&M/2011(iii) all dated December 26 2011]. Each bank or PD on the basis of firm orders received from their constituents will submit a single consolidated non-competitive bid on behalf of all its constituents in electronic format on the Negotiated Dealing System (NDS).  Allotment under the non-competitive segment to the bank or PD will be at the cut-off price that will emerge in the auction on the basis of the competitive bidding.

3. Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Negotiated Dealing System (NDS) on December 30, 2011 Bids in physical form will not be accepted except in extraordinary circumstances such as general failure of the NDS system. The non-competitive bids should be submitted between 10.30 a.m. and 11.30 a.m. and the competitive bids should be submitted between 10.30 a.m. and 12.30 p.m.   

4. An investor can submit more than one competitive bid at different prices in electronic format on the Negotiated Dealing System (NDS). However, the aggregate amount of bids submitted by a person in an auction should not exceed the notified amount of auction.

5. On the basis of bids received, the Reserve Bank will determine the minimum price up to which tenders for purchase of Government Stock will be accepted at the auctions. Bids quoted at rates lower than the minimum price determined by the Reserve Bank of India will be rejected. Reserve Bank of India will have the full discretion to accept or reject any or all bids either wholly or partially without assigning any reason.

6. The result of the auctions will be announced on December 30, 2011 and payment by successful bidders will be on January 02, 2012 (Monday).  

7. The Government Stocks will be issued by credit to Subsidiary General Ledger Account (SGL) of parties maintaining such account with Reserve Bank of India or in the form of Stock Certificate. Interest on the Government Stock will be paid half-yearly.

8. The Government Stocks will be repaid at par on July 9, 2017, November 14, 2024, September 21, 2027 and December 12, 2041 respectively.

9. The Stocks will qualify for the ready forward facility.

10. The Stock will be eligible for “When Issued” trading during the period December 27- December 30, 2011 in accordance with the guidelines on ‘When Issued’ transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No.RBI /2006-07/178 dated November 16, 2006 as amended from time to time.

Yours faithfully

(Vivek Aggarwal)
General Manager

Encls:  As above