RBI revises the Subsidiary General Ledger (SGL) Account Guidelines and Constituents' Subsidiary General Ledger (CSGL) Account Guidelines

The Reserve Bank of India (RBI) on October 05, 2021 has issued revision in the eligibility criteria and Subsidiary General Ledger (SGL) Account Guidelines and Constituents' Subsidiary General Ledger (CSGL) Account Guidelines.

The eligibility criteria and guidelines for the Subsidiary General Ledger (SGL) Account are as followed:

• Licensed Banks

• Primary Dealers authorised by Reserve Bank of India

• Financial institutions as defined in terms of Section 45-I (c) (ii) of the Reserve Bank of India Act, 1934 (2 of 1934)

• Central Government

• State Governments

• Insurance Companies regulated by Insurance Regulatory and Development Authority

• Mutual Funds regulated by Securities and Exchange Board of India

• Provident and Pension Funds and Pension Fund Managers

• Foreign Central Banks with prior approval of the Bank

• Depositories as defined under the Depositories Act 1996

• Stock Holding Corporation of India (SHCIL)

Guidelines

• A Subsidiary General Ledger (SGL) Account shall mean an account opened and held with the Bank for holding or/and transacting in Government Securities.

• The Bank may open and maintain SGL accounts for conduct of its operations and for such purposes the Bank may deem necessary.

• Value Free Transfer (VFT): For the purpose of these guidelines, Value Free Transfer (VFT) of the securities shall mean transfer of securities from one SGL account to another SGL or CSGL account without corresponding payment leg in the books of RBI. Value Free Transfers of securities shall be effected by SGL holders in the manner as may be prescribed by the Bank.

• The entity opening an SGL account shall submit an application form, indemnity bond and such other documents, as may be decided by the Bank from time to time.

• The Bank may at any time direct an SGL account holder to furnish to the Bank, in such form, at such intervals and within such time, such statements, information or particulars relating to the SGL account or connected with transactions in the SGL account.

• Any misuse of the SGL facility by the entity concerned, will make the entity liable to be debarred from holding of such an account as mentioned in Section 27 of the Government securities Act, 2006 , in addition to inviting the penalties as provided in Section 30 of the Act.

• The Reserve Bank, on being satisfied that it is necessary to do so, may exempt any SGL account holder or a class of SGL account holders either generally or for such period as may be specified, from any or all of the provisions of these Guidelines, subject to such terms or conditions or limitations or restrictions as it may think fit and proper to impose, in the interest of public or financial system of the country.

• The SGL holders shall abide by these Guidelines on a continuous basis. Any failure to do so will attract appropriate action by the Bank including application of penal provisions under Section 30 of the Act. A declaration to this effect shall be submitted to PDO, Mumbai on an annual basis.

The eligibility criteria and guidelines for the Constituents' Subsidiary General Ledger (CSGL) account are as followed:

• Licensed banks with minimum net worth of Rs.100 cr.

• Primary Dealers authorised by Reserve Bank of India

• Depositories as defined under Depositories Act 1996

• Clearing Corporation of India Limited or other Clearing Corporations as may be approved by the Bank

• National Bank for Agriculture and Rural Development (NABARD)

• Stock Holding Corporation of India Ltd (SHCIL)

• Such other entities as may be allowed by the Bank from time to time.

Guidelines

• An eligible entity will, in normal circumstances, be allowed to open and maintain only one CSGL account. In certain cases, the Bank may allow an entity to open additional CSGL accounts. A constituent is not permitted to open and maintain an SGL account with the Bank (except when the SGL account has been opened after specific approval of the Bank or for regulatory/margin purposes).

• Value Free transfer - For the purpose of these Guidelines, Value Free Transfers (VFT) of the securities shall mean transfer of securities from one CSGL account to another CSGL or SGL account without corresponding payment leg in the books of RBI. Value Free Transfers of securities shall be effected by CSGL holders in the manner as may be prescribed by the Bank.

• The CSGL account holders shall ensure that the constituents for whom the gilt accounts are opened/maintained satisfy the eligibility conditions for holding Government securities in terms of the General Loan Notifications as also the specific Loan Notifications issued by the Government.

• The CSGL account holders shall ensure that deals/transactions pertaining to constituents are put through according to the instructions of the constituents concerned and appropriate records are maintained for such instructions received from their constituents. The CSGL account holder shall refrain from setting off Government securities in the CSGL account or otherwise deal with the Government securities to extinguish partly or fully any amounts due to it from the constituents without a written consent from the constituents.

• The CSGL account holder shall be accountable/responsible for the movement of Government securities from/to the CSGL account and shall provide system generated audit trail, whenever called for by the constituent or the Bank.

• The CSGL account holder shall credit the constituents' fund account with the due amount of interest/redemption proceeds on due date itself and maintain appropriate record of the same for verification.

• The CSGL account holders must put the operations of their CSGL account, as also the transactions in the gilt accounts of their constituents, under the purview of their Concurrent Auditors, who shall verify and comment, inter alia, upon the following aspects of CSGL account transactions:

a) Completion of documents for opening the constituent account;

b) Authorisation of each transaction in the CSGL account by the constituent concerned and that the securities bought/sold have been credited/debited to the gilt account on due date;

c) Issuance of debit/credit advices on time to the constituents for each transaction put through on their behalf;

d) Reconciliation of the outstanding balances in the CSGL account vis-à-vis the constituent-wise holding details on a daily basis;

e) Receipt of balance confirmation certificates from the constituents on half-yearly basis;

f) Crediting of interest/redemption proceeds to the constituents' fund account on due date; and

g) Ensuring the eligibility of the constituent, as per latest guidelines issued by the Bank, to put through the deal/transaction and that the deal price is in line with the prevailing market rates.

• The CSGL account holder shall submit constituent-wise holding details electronically, as per Annex to the Chief General Manager, Reserve Bank of India, Internal Debt Management Department, Central Office Building, 23rd Floor, Fort, Mumbai - 400001 (email id: [email protected]) on a quarterly basis as on March 31, June 30, September 30 & December 31, by the 1st week of the following month.

• The CSGL holders shall abide by these Guidelines on a continuous basis. Any failure to do so will attract appropriate action by the Bank including application of penal provisions under Section 30 of the Act. A declaration to this effect shall be submitted to PDO, Mumbai on an annual basis.

• The Reserve Bank, on being satisfied that it is necessary to do so, may exempt any CSGL account holder or class of CSGL account holders either generally or for such period as may be specified, from any or all of the provisions of these Guidelines, subject to such terms or conditions or limitations or restrictions as it may think fit and proper to impose, in the interest of public or financial system of the country.

• The CSGL account holders must have appropriate Information Technology (IT) infrastructure to maintain accounts and put through deals on behalf of their constituents with adequate contingency/back-up plan to ensure business continuity. The IT infrastructure shall be subject to Information System (IS) audit by certified professionals every year and any observations made by them shall be immediately complied with.

*Disclaimer - kindly find the detailed copy of the guidelines in the provided link.

[Notification No. RBI/2021-22/107 IDMD.CDD.No.S931/11.22.001/2021-2022 ]