Executive Summary:
This document outlines revised guidelines for Value Free Transfers (VFT) of government securities between SGL/CSGL accounts, effective November 16, 2018, to enable more efficient operations in the Government securities market. It specifies eligible transactions for VFT, which do not require consideration. Entities effecting VFT must report these transactions weekly to the Public Debt Office, Mumbai Regional Office, RBI, as per the provided format.
Key Points / Main Content:
* **Value Free Transfers (VFT) Definition:** VFT refers to the transfer of government securities from one SGL/CSGL account to another without consideration. Transfers not covered require specific RBI approval.
* **Permitted Transactions for VFT:** The following transactions are eligible for VFT:
* Gifts and inheritance between CSGL accounts.
* Interdepository transfers between CSGL accounts of depositories arising out of own account transfers or trades in exchanges between demat account holders of different depositories.
* Transfers from CSGL accounts of clearing corporations to depositories or other CSGL holders for distribution of securities allotted during primary auction settlement.
* Transfers due to mergers and amalgamations.
* Transfers due to change of custodians by Foreign Portfolio Investors (FPIs), subject to SEBI approval.
* Own account transfers from SGL/CSGL accounts to CSGL of depositories, with no change in beneficiary ownership.
* Transfers of Gilt Account Holders (GAH) securities from one CSGL account to another when a GAH closes an account and opens a new one elsewhere.
* Transfers related to margin/collateral requirements, including:
* Transfers between Clearing Corporation of India Ltd (CCIL) and its members.
* Transfers under Credit Support Annexes (CSA) and Global Master Repurchase Agreement (GMRA), kept in a separate CSGL account with RBI permission and subject to audit.
* Posting of Government securities as margin collateral in all segments of the recognized stock exchanges between the Foreign Portfolio Investors (FPIs) and their clearing members.
* Posting of margin collateral for domestic participants in recognized stock exchanges.
* **VFT Initiation and Reporting:**
* Eligible entities can initiate VFT via RBI's e-Kuber system.
* Entities must report VFT details weekly to the Public Debt Office, Mumbai Regional Office, RBI, using the format in Annex I.
* **Other VFT Permissions:** Permission for VFT for purposes not specified may be granted on a case-by-case basis upon application to the Public Debt Office, Mumbai Regional Office, RBI.
* **Supersession and Penalties:** These guidelines supersede earlier instructions. Violations may attract penalties under the Government Securities Act, 2006.
Impact Analysis:
Clearing Corporations:
Impact: Involved in VFT for primary auction settlement and margin/collateral transfers.
Action Required: Ensure proper mechanisms for VFT and segregation of proprietary securities and securities held as margin collateral on behalf of their FPI clients.
* **Depositories:**
* Impact: Facilitate interdepository transfers and receive securities from clearing corporations for distribution.
* Action Required: Establish mechanisms to ensure the bonafide nature of interdepository transfers, advising Depository Participants, and confirming risk management processes and audit oversight.
* **Foreign Portfolio Investors (FPIs):**
* Impact: Affected by change of custodian rules and margin/collateral posting requirements.
* Action Required: Obtain SEBI approval for custodian changes and provide undertakings for non-trade margin/collateral transactions.
* **Gilt Account Holders (GAH):**
* Impact: Can transfer securities when closing and opening gilt accounts.
* Action Required: Ensure compliance when transferring securities to a new CSGL account holder.
* **RBI Regulated Entities:**
* Impact: Must be at least on one side of margin/collateral transactions under CSA and GMRA.
* Action Required: Maintain appropriate documentation and subject transactions to concurrent and management audit.
* **CSGL Account Holders:**
* Impact: Required to report VFT transactions.
* Action Required: Effect VFT through e-Kuber and submit weekly reports to the Public Debt Office, Mumbai Regional Office, RBI, in the specified format.
Key Entities Referenced
Reserve Bank of India: The central bank of India, the issuer of the circular.
Government Securities: Debt instruments issued by the government.
Subsidiary General Ledger Account: An account maintained with the Reserve Bank of India for holding government securities.
Value Free Transfer: Transfer of securities from one SGL/CSGL account to another without consideration.
Mumbai, Maharashtra: City in India, location of the Public Debt Office of the Reserve Bank of India.
Foreign Portfolio Investors: Investors investing in India from other countries.
Securities and Exchange Board of India: Regulatory body for the securities market in India.
Clearing Corporation of India Ltd: Organisation in India that facilitates clearing and settlement of transactions in money, government securities and other debt instruments.
भारतीय �रज़व र् बक�
RESERVE BANK OF INDIA
____________________ ______________________
www.rbi.org.in
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
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A reference is invited to Notification No.183 dated September 05, 20112 on eligibility criteria and
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operational guidelines for Subsidiary General Ledger (SGL) / Co2nstituent Subsidiary General
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Ledger (CSGL)/ accounts(as amended thereafter) under whic5h Value Free Transfers (VFT) of
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Government securities from one SGL/CSGL account to another SGL/CSGL account were
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allowed by the Reserve Bank. The SGL/CSGL Guidelines have since been revised vide
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Notifications dated 29.10.2018. It has now been decided to issue separate guidelines for VFT
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to enable more efficient operations in the GoveOrnment securities market. Value Free Transfers
between SGL/CSGL accounts not coveredf by this circular would require specific approval of
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the Reserve Bank. .
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2. VFT of the government securities shall mean transfer of securities from one SGL/CSGL
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to another SGL/CSGL accounat, without consideration. Such transfers could be on account of
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posting of margins, inter-depository transfers of government securities arising from trades in
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exchanges between idemat account holders of different depositories, gift/inheritance and
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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.
आंत�रक ऋण �बंध िवभाग, क��ीय कायार्लय, क��ीय कायार्लय भवन , शहीद भगत�सहं मागर् 23 वी मंिजल, मुंबई – 400 001, भारत
फोन : (022) 2266 1602-04, फैक्स : (022) 22644158, 2270 5125, ई-मेल :cgmidmd@rbi.org.in
Internal Debt Management Department, Central Office, Central Office Building, 23rdFloor, ShahidBhagat Singh Marg,, Mumbai-400 001, India
Telephone:02222661602-04,Fax :( 022) 2264 4158, 2270 5125,Email :cgmidmd@rbi.org.in
िहन्दी आसान हइै सका �योग बढ़ाइए। ,
चेतावनी :�रज़वर् ब�क �ारा ईमेल, डाक, एसएमएस या फोन काल के ज�रये �कसी क� भी �ि�गत जानकारी जैसे ब�क खाते का ब्यौरा, पासवडर् आ�द नह� मांगी जाती है।
यह धन रखने या देने का �स्ताव भी नह� करता ह।ै ऐसे �स्ताव� का �कसी भी तरीके से जवाब मत दीिजये।
Caution: RBI never sends emails, SMSs or makes calls asking forpersonal information like bank account details, passwords, etc. It never keeps or
offers funds to anyone. Please do not respond in any manner to such offers.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
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bonafide nature of these transfers before effecting the VFT. This will entail suitably
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advising the Depository Participants, to ensure that board approved risk
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management processes and audit oversight are ,applied before transactions in
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Government securities are accepted at their level and to confirm the same to the
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Depositories; e
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iii. Transfer from CSGL accounts of clearinog corporations to the CSGL account of the
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depositories or to other CSGL holders for onward transfer to clients for distribution
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of securities allotted during prima ry auction settlement;
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iv. Transfer of securities on account of mergers and amalgamations;
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v. Transfer of securities o n account of change of custodians by Foreign Portfolio
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Investors, subject to awpproval by SEBI
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vi. Own account trransfer of securities from SGL/CSGL accounts to CSGL of
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depositories, hwhere there is no change in beneficiary ownership;
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vii. Transfer Wof 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
recognized stock exchanges – CSGL account holders, will be permitted to
effect VFT of Government Securities for margin/margin reversal movements
between the Foreign Portfolio Investors (FPIs) and their clearing members,
who are constituents/ Gilt Account holders of the CSGL account holders, for
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offering G-Secs as collateral to the recognized stock exchanges in India for
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eligible transactions in recognized stock exchanges. The CSGL account
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holders shall obtain a specific request alon,g with an undertaking from the
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concerned FPI and their clearing membe0rs that the transactions are non-
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trade and only for margin/collateral peurpose. Clearing members would be
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required to put in place a robuost system for clear segregation of their
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proprietary securities and securities held as margin /collateral on behalf of
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their FPI clients.
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d. Posting of margin /collateral as above for domestic participants in
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recognized stowck exchanges.
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4. The eligible entitiesd will be allowed to initiate VFT through RBI’s Core Banking System
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viz., e-Kuber for the triatnsactions mentioned at i. to viii. above. The details of the VFT effected
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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 October 29, 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 subjectmatter. 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.
Yours faithfully
Sd/-
(A.Mangalagiri)
Chief General Manager
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WAnnex 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)
Sl.No Date of Instrument Purpose Transferor Transferee Face Remarks
transfer Nomenclature of Value
transfer of the
bonds
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