T+2 settlements for outright secondary market transactions in Government Securities undertaken by Foreign Portfolio Investors and reported on NDS-OM

RBI/2014–15/507 FMRD.DIRD.06/14.03.007/2014–15

March 20, 2015

Please refer to para­graph 27 of the fourth bi-month­ly Mon­e­tary Pol­i­cy State­ment 2014–15 where­in it was announced that in order to address oper­a­tional issues faced by for­eign port­fo­lio investors (FPIs) and long term for­eign investors, they will be pro­vid­ed extend­ed report­ing tim­ings on trade date and an option for T+2 set­tle­ments for sec­ondary mar­ket OTC trades in gov­ern­ment securities.

2. In this con­nec­tion, a ref­er­ence is invit­ed to RBI cir­cu­lar IDMD.PDRS./4783/10.02.01/2004–05 dat­ed May 11, 2005 on T+1 set­tle­ment in Gov­ern­ment secu­ri­ties market.

3. It has now been decid­ed in con­sul­ta­tion with mar­ket par­tic­i­pants, to per­mit set­tle­ments on T+2 basis for out­right sec­ondary mar­ket trans­ac­tions in Gov­ern­ment Secu­ri­ties under­tak­en by FPIs and report­ed on NDS-OM, sub­ject to fol­low­ing conditions:

1. All sale and pur­chase trans­ac­tions in Gov­ern­ment secu­ri­ties, where at least one of the par­ties is an FPI, will be set­tled only on T+2 basis. These will include deals between a domes­tic enti­ty and an FPI, deals between two FPIs of dif­fer­ent cus­to­di­ans, deals between a cus­to­di­an and its FPI Gilt Account Hold­er, and deals between two FPI Gilt account Hold­ers of the same custodian.
2. All oth­er trades not involv­ing an FPI will con­tin­ue to set­tle on T+1 basis.
3. Cus­to­di­an bank of the FPI sell­ing the secu­ri­ty or the coun­ter­par­ty enti­ty sell­ing the secu­ri­ty to the FPI will have to report the deal on trade date itself with­in the pre­scribed report­ing time.
4. Cus­to­di­an bank of the FPI buy­ing the secu­ri­ty can report the deal till next busi­ness day upto pre­scribed report­ing time.

4. Guide­lines on DVP III set­tle­ment issued vide cir­cu­lar IDMD.PDRS.05/10.02.01/2003–04 dat­ed March 29, 2004 and as updat­ed from time to time shall con­tin­ue to apply for such trans­ac­tions set­tled on T+2 basis.

5. The guide­lines shall come into effect from April 6, 2015.