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The RBI has issued Draft Directions on Secondary Market Transactions in Government Securities.
The Reserve Bank of India (RBI) has issued Draft Directions on Secondary Market Transactions in Government Securities. The draft aims to simplify and update the rules for buying and selling Government securities in the secondary market.
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Who Can Buy and Sell Government Securities?
The following entities are eligible to participate in the secondary market:
- All residents of India, including individuals, companies, firms, trusts, provident funds, pension funds, State Governments and Union Territories.
- Non-residents who are allowed to invest under the Foreign Exchange Management (Debt Instruments) Regulations, 2019.
Who Can Trade on NDS-OM?
Government securities can be traded through the Negotiated Dealing System – Order Matching (NDS-OM) platform by:
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- Direct members of NDS-OM.
- Indirect members through their direct member.
- Retail Direct Gilt Account holders under the RBI Retail Direct Scheme.
- Individuals holding demat accounts with eligible depository participant banks.
- Individuals using the Stock Broker Connect facility through SEBI-registered depositories.
Minimum Investment
- The minimum transaction size is ₹10,000 (face value).
- Transactions must be in multiples of ₹10,000, unless RBI specifies otherwise.
Market Timings
- Government securities can be traded from 9:00 AM to 5:00 PM on Mumbai working days.
- RBI may change market timings from time to time.
Sale of Government Securities
- Investors can sell Government securities after entering into a valid purchase, repo or borrowing contract.
- Government securities allotted in a primary auction can also be sold on the same day of allotment.
- Certain conditions apply for short selling and repo transactions.
Reporting of Transactions
- Transactions done outside the NDS-OM platform must be reported to NDS-OM by both parties within 15 minutes of execution.
- Direct members are responsible for reporting transactions made by their gilt account holders.
Counterparty Confirmation
- Buyers and sellers must exchange confirmation for all Government securities transactions that are not matched on NDS-OM.
Settlement Rules
- All Government securities transactions will normally be settled on a T+1 basis (one working day after the trade date).
- FPIs may settle transactions on T+1 or T+2, as permitted under RBI rules.
- Settlement will take place on a Delivery versus Payment (DvP) basis through CCIL or any other RBI-approved clearing agency.
- Direct members are responsible for settling transactions of their gilt account holders and demat account holders.
Trading on Stock Exchanges
- Government securities can also be traded on recognised stock exchanges.
- Trading hours will be decided by SEBI in consultation with RBI.
- Settlement of these trades will follow SEBI’s instructions.
- Stock exchanges must provide returns and other transaction-related information to RBI whenever required.
Click here to download RBI Circular
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