RBI notification for forward contracts in gilts

RBI notification for forward contracts in gilts

MUMBAI, MAR 8: In accordance with the powers delegated recently by the Government of India, the Reserve Bank of India (RBI) has issued a notification permitting ready forward contracts in government securities entered into by eligible banks, institutions and non-banks in accordance with the terms and conditions laid down by it.

Ready forward contracts may be entered into by banking companies, co-operative banks or any person maintaining subsidiary general ledger (SGL) account and current account with the RBI only among themselves. Presently there are 64 entries, other than banking companies and co-operative banks having SGL and current accounts with the RBI in Mumbai.

Such ready forward contracts should be settled through the SGL account of the participants with the RBI at Mumbai only.

Forward trading in securities was so far prohibited in terms of a notification dated June 27, 1969 issued under Section 16 of the Securities Contracts (regulation) Act, 1956 by the Government of India. Ready forward contracts in government securities by specified entities were being permitted by the Government of India by way of exemption from the 1969 notification from time to time, on the recommendations of the RBI.

The Centre has recently rescinded the 1969 notification prohibiting forward trading in securities and delegated powers to the RBI under Section 16 of the Securities Contracts (regulation) Act for regulating contracts in government securities, money market securities, gold-related securities and derivatives based on these securities as also the ready forward contracts in all debt securities in terms of Section 16 of the Act.