In exercise of the powers conferred vide explanation to subsection 2 of section 11 read with clause

## Report on Amendment to Government Securities STRIPS Policy **1. Executive Summary:** This report analyzes a notification from the Reserve Bank of India (RBI) constituting an amendment to the existing policy regarding Separate Trading of Registered Interest and Principal of Securities (STRIPS). The amendment, detailed in notification F. No. IDMD. No. S32110.18.060 202526, modifies aspects related to the systems used for trading and eligibility criteria for securities to be stripped and reconstituted. The key changes involve substituting the "PDONDS Negotiated Dealing System" with the "Reserve Bank of India Core Banking Solution eKuber System" and expanding the eligibility to include all fixed coupon securities issued by the Government of India and certain fixed coupon securities issued by State Governments/Union Territories. **2. Introduction:** This report aims to provide a clear and concise overview of the amendment to the Government Securities STRIPS policy, as detailed in the provided RBI notification (F. No. IDMD. No. S32110.18.060 202526 dated May 29, 2025). The analysis is based solely on the text of the notification itself. **3. Policy Overview:** * **Original Policy:** This notification amends notification IDMD No. 1762 200910 dated October 16, 2009, which was further amended by Notification No. IDMD.GBD 261408.08.16201819 dated 10th April 2018. * **Core Objective(s):** Based on the text, the core objective of STRIPS appears to be facilitating the separate trading of interest and principal components of government securities. The amendment seems designed to improve the efficiency of trading and broaden the scope of securities eligible for STRIPS. **4. Background and Rationale:** The amendment likely aims to address limitations or inefficiencies in the original policy. Specifically: * The change in trading systems suggests a move towards a more integrated or efficient platform within the RBI's infrastructure. The original system, PDONDS, may have been outdated or less effective than the new eKuber system. * The expanded eligibility criteria for securities suggest a desire to increase the volume and liquidity of the STRIPS market. **5. Key Provisions / Changes:** This section details the specific changes introduced by the amendment: * **Change 1: Trading System** * **Original Rule:** Clause 1 of Section II referred to "PDONDS Negotiated Dealing System." * **New Rule:** The words "PDONDS Negotiated Dealing System" are substituted with "Reserve Bank of India Core Banking Solution eKuber System." * **Effect:** This change likely aims to streamline the trading process by utilizing the RBI's internal core banking solution, potentially leading to improved efficiency and integration. * **Change 2: Eligibility Criteria** * **Original Rule:** Clause 2 of Section II is entirely substituted. The original clause isn't provided in the text, so we can only analyze the new clause. * **New Rule:** * All fixed coupon securities issued by the Government of India, irrespective of the year of maturity, shall be eligible for StrippingReconstitution. * All fixed coupon securities issued by a State Government/Union Territory, having a residual maturity of up to 14 years and minimum outstanding of 1,000 crore as on the day of stripping, shall be eligible for Stripping. * The securities must be eligible for Statutory Liquidity Ratio (SLR) and be transferable. * **Effect:** This significantly broadens the range of eligible securities. It allows for the stripping of all central government fixed coupon bonds, regardless of maturity. It also includes state government and union territory bonds with specific criteria (residual maturity and outstanding amount), potentially increasing the volume of STRIPS available and promoting wider participation in the market. **6. Target Audience and Stakeholders:** Based on the text, the primary target audience includes: * **Banks and Financial Institutions:** As holders and traders of government securities, they are directly affected by the changes in eligibility criteria and trading systems. * **Investors:** Both institutional and retail investors who participate in the STRIPS market will be impacted by the increased availability of STRIPS. * **State Governments/Union Territories:** The inclusion of their securities, under certain conditions, directly impacts their ability to participate in the STRIPS market. **7. Implementation Aspects (Inferred):** * **Responsible agency:** The Reserve Bank of India (RBI) is the responsible agency for implementing and overseeing this amendment. * **Procedures:** The text doesn't provide specific timelines or detailed procedures. The implementation likely involves updates to the eKuber system and communication to relevant stakeholders regarding the expanded eligibility criteria. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes of these changes are: * **Increased Efficiency:** The move to the eKuber system should improve the speed and efficiency of STRIPS trading. * **Enhanced Liquidity:** Broadening the eligibility criteria should lead to a larger pool of eligible securities, resulting in increased liquidity in the STRIPS market. * **Wider Participation:** The increased availability and potentially improved efficiency could attract a broader range of investors to the STRIPS market. * **Better Management of Government Debt:** Facilitating STRIPS can assist the government in managing its debt profile effectively. **9. Conclusion:** The amendment to the Government Securities STRIPS policy, as detailed in RBI notification F. No. IDMD. No. S32110.18.060 202526, represents a significant step towards enhancing the efficiency and scope of the STRIPS market. By updating the trading system and broadening the eligibility criteria, the amendment is expected to increase liquidity, attract wider participation, and contribute to better management of government debt. These changes are likely to have a positive impact on banks, financial institutions, and investors participating in the government securities market.

Key Entities Referenced