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) |