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When Issued transactions in Central Government Securities – accounting and related aspects - UCBs

RBI No. 2006-07/ 110
UBD BPD Cir No: 7 /09.29.000/2006-07

August 18, 2006

Chief Executive Officers of
Scheduled Primary (Urban) Cooperative Banks
(All NDS-OM members)

Dear Sir/Madam,

‘When Issued’ transactions in Central Government Securities – accounting and related aspects - UCBs

Please refer to our Internal Debt Management Department’s Circular No. IDMD. 3426/ 11.01.01 (D)/ 2005-06 dated May 3, 2006 allowing all NDS – OM members to undertake ‘When issued transactions’ on the NDS – OM platform. The accounting treatment of transactions undertaken in ‘When Issued’ (WI) securities would be as follows:

1. Accounting Treatment

(a) The ‘WI’ security should be recorded in books as an off balance sheet item till issue of the security

(b) The off balance sheet net position in ‘WI’ market should be marked to market scrip-wise on a daily basis at the day's closing price of the 'WI' security. In case the price of the 'WI' security is not available, the value of the underlying security (as stipulated in the Master Circular No: 8 dated July 12, 2006) be used instead. Depreciation, if any, should be provided for and appreciation, if any, should be ignored

( c) The off balance sheet (net) position in 'WI' securities, scripwise, would attract a risk weight of 2.5%.

(d) On delivery, the underlying security may be classified in any of the three categories, viz; ‘Held to Maturity’, ‘Available for Sale’ or ‘Held for Trading’, depending upon the intent of holding, at the contracted price.

2. Eligibility for SLR status

The securities bought in the ‘When Issued’ market would be eligible for SLR purposes, only on delivery.

3. Please acknowledge receipt to the Regional Office concerned.

Yours faithfully,

Chief General Manager in-Charge