RBI/2018-19/78
IDMD.CDD.No.1241/11.02.001/2018-19
November
16, 2018
All SGL/CSGL Account holders
Madam/Sir,
Value
Free Transfer (VFT) of Government Securities – Guidelines
A reference is invited to
Notification No.183 dated September 05, 2011 on eligibility criteria and
operational guidelines for Subsidiary General Ledger (SGL) / Constituent
Subsidiary General Ledger (CSGL)/ accounts(as amended thereafter) under
which Value Free Transfers (VFT) of Government securities from one SGL/CSGL
account to another SGL/CSGL account were allowed by the Reserve Bank. The
SGL/CSGL Guidelines have since been revised vide Notifications dated
29.10.2018. It has now been decided to issue separate guidelines for VFT to
enable more efficient operations in the Government securities market. Value
Free Transfers between SGL/CSGL accounts not covered by this circular would
require specific approval of the Reserve Bank.
2. 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
de-mat/gilt accounts on allotment after participation in the non-competitive
segment of the primary auction.
Permitted Transactions for VFT:
3. The following transactions
shall be eligible for VFT of government securities:
i. Transfers on account of gifts
and inheritance, between one CSGL account to another.
ii. Inter-depository transfers
(between CSGL accounts of depositories) arising out of the following:
a) own account transfer of
securities by investors/brokers holding accounts in more than one
depository.
b) trades in exchanges between
de-mat account holders of different depositories. In such cases,
depositories shall put in place suitable mechanisms to ensure, the bonafide
nature of these transfers before effecting the VFT. This will entail
suitably advising the Depository Participants, to ensure that board
approved risk management processes and audit oversight are applied before
transactions in Government securities are accepted at their level and to
confirm the same to the Depositories;
iii. Transfer from CSGL accounts
of clearing corporations to the CSGL account of the depositories or to
other CSGL holders for onward transfer to clients for distribution of
securities allotted during primary auction settlement;
iv. Transfer of securities on
account of mergers and amalgamations;
v. Transfer of securities on
account of change of custodians by Foreign Portfolio Investors, subject to
approval by SEBI
vi. Own account transfer of
securities from SGL/CSGL accounts to CSGL of depositories, where there is
no change in beneficiary ownership;
vii. Transfer of Gilt Account
Holder’s(GAH) securities from one CSGL account to another CSGL account, in
case a GAH decides to close his gilt account with one CSGL account holder
and open a new gilt account with another CSGL account holder.
viii. Transfer of securities
pertaining to margin requirement/collateral posting in the following cases:
a.
Transfer
of margin/collateral between Clearing Corporation of India Ltd (CCIL) and
members of CCIL.
b.
Transfer
of margin /collateral under the Credit Support Annexes (CSA) and the Global
Master Repurchase Agreement (GMRA)
Provided that the margin/collateral should be kept in a separate CSGL
account opened with RBI’s specific permission for the purpose. All such
transactions should have an RBI regulated entity at least on one side of
the transaction and should be subjected to concurrent and management audit.
Appropriate documentation should be maintained.
c.
Posting
of Government securities as margin /collateral in all segments of the
recognised stock exchanges - VFT of G-Sec will be permitted for
margin/margin reversal movements between the Foreign Portfolio Investors
(FPIs) and their clearing members with whom they have a Gilt Account, for
offering G-Secs as collateral to the recognized stock exchanges in India
for their eligible transactions in recognized stock exchanges. The CSGL
account holders shall obtain a specific request along with an undertaking
from the concerned FPI and their clearing members that the transactions are
non-trade and only for margin/collateral purpose. Clearing members would be
required to put in place a robust system for clear segregation of their
proprietary securities and securities held as margin /collateral on behalf
of their FPI clients.
d.
Posting
of margin /collateral as above for domestic participants in recognized
stock exchanges.
4. The eligible entities will be
allowed to initiate VFT through RBI’s Core Banking System viz., e-Kuber for
the transactions mentioned at i. to viii. above. The details of the VFT
effected as above may be reported by entities effecting the VFT on a weekly
basis to The Regional Director, Public Debt Office, Mumbai Regional Office,
RBI, Fort, Mumbai 400 001, as per the format in Annex I.
5. Permission for VFT for any
other purpose may be granted on a case to case basis. Applications for the
same may be submitted to by Public Debt Office, Mumbai Regional Office,
RBI, Fort, Mumbai - 400 001.
6. These guidelines are issued
by the Bank in exercise of the powers conferred under Notifications dated
29.102.2018 on Subsidiary General Ledger Account: Eligibility Criteria and
Operational Guidelines and Constituents' Subsidiary General Ledger Account:
Eligibility Criteria and Operational Guidelines and supersede earlier
instructions issued on the subject matter. Any violations of the conditions
specified therein shall attract provisions of Section 27 of the Government
Securities Act, 2006 (38 of 2006), in addition to inviting penalties as provided
in Section 30 of the Act ibid.
(A.Mangalagiri)
Chief General Manager
Annex
I
Report to be submitted by
eligible entities effecting Value Free Transfer for permitted transactions
(ref: IDMD.CDD.No1241/11.02.001/2018-19 dated November 16, 2018)
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Date
of transfer
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Instrument
Nomenclature
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Purpose
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Transferor
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Transferee
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Face
Value of the bonds
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Remarks
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