Investments in Government Securities by Urban Co-operative Banks

Investments in Government Securities by Urban Co-operative Banks

Transaction in Government Securities:

Urban Co-operative Banks (UCBs) must follow these rules when dealing with Government Securities:

General Instructions

  • UCBs can invest in Government Securities through RBI auctions, secondary market transactions via various platforms like NDS-OM, OTC, NDS-OM-Web, and Exchanges.
  • Transactions should be through Subsidiary General Ledger (SGL) accounts, Gilt accounts, or dematerialized accounts.
  • UCBs should not issue or accept Bank Receipts for these transactions.
  • For maintaining Statutory Liquidity Ratio (SLR), refer to RBI’s specific Directions.
  • In OTC transactions, UCBs should deal with certain entities like commercial banks, PDs, and financial institutions.

Membership of NDS-OM

  • Licensed UCBs meeting specific criteria can access NDS-OM directly.
  • UCBs seeking NDS-OM membership should first get regulatory clearance.
  • UCBs without direct access to NDS-OM should use gilt or demat accounts through an NDS member.

Subsidiary General Ledger (SGL) Account

UCBs with an SGL account should not maintain a Gilt account with a CSGL account holder.

Gilt Account

  • UCBs should use their Gilt account for government securities transactions.
  • If a UCB has a Gilt account with a non-banking institution, it must inform them about its designated funds account.
  • Settlement of Transactions
  • Transactions through SGL/Gilt accounts should be reported and settled through NDS/NDS-OM and CCIL.
  • Settlement of primary auctions and secondary market transactions in government securities should follow specific RBI circulars.
  • Any default in SGL transactions must be reported to RBI immediately.

Investment in Government Security through Primary Auction

  • UCBs can submit bids in competitive auctions for Government Securities.
  • UCBs can participate in non-competitive bidding for certain Government and State Development Loans.

Sale of Government Securities Allotted in Primary Issues on the Same Day

UCBs must follow RBI guidelines for selling securities allotted in primary issues on the same day.

Sale of Government Security Already Contracted for Purchase

Scheduled UCBs can sell a Government security they have contracted to purchase.

Short Sale in Government Securities

  • UCBs meeting certain conditions can undertake intra-day short sales in Government Securities.
  • 0They must follow RBI’s Short Sale Directions.

Transaction in Government Securities on When Issued Basis

  • UCBs must adhere to RBI’s When Issued Transactions Directions.
  • Accounting for WI transactions should follow specific guidelines.

Value Free Transfer of Securities

Value Free Transfer (VFT) in government securities should follow RBI’s guidelines.

Investment in Government Securities through Exchanges

  • UCBs can transact in Government securities through exchanges.
  • They should open a demat account with a bank DP of NSDL/CDSL or with SHCIL.
  • UCBs must ensure compliance with RBI/SEBI norms and internal control systems for exchange trading and settlement.

Repo / Reverse Repo in Government Securities

Repo transactions by UCBs should follow RBI’s Repurchase Transactions Directions.

Retailing of Government Securities

Scheduled UCBs can retail Government Securities, adhering to RBI guidelines.

Separate Trading of Registered Interest and Principal Securities (STRIPS)

Stripping/reconstitution of Government Securities should follow RBI guidelines, with accounting and valuation as per specific instructions.

Investment Portfolio of Primary (Urban) Co-operative Banks

Classification of Investments

Shifting Among Categories in the Investment Portfolio of UCBs

Valuation of Investments of Urban Co-operative Banks

Investment in Non-SLR Securities by Urban Co-operative Banks

Placement of Deposits with Other Banks/Institutions by Urban Co-operative Banks

Accounting and Provisioning by Urban Co-operative Banks

Restrictions on holding shares in other Co-operative Societies