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Wednesday, Dec 22, 2004

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Govt Securities Bill tabled in Lok Sabha

Our Bureau

New Delhi , Dec. 21

THE Finance Minister, Mr P. Chidambaram, on Tuesday introduced the Government Securities Bill, 2004 in the Lok Sabha. The Bill aims to make trading in Government securities more customer-friendly by doing away with the various `rigidities and deficiencies' in the Public Debt Act, 1944.

Among other things, the new Bill — which also seeks to repeal the Indian Securities Act, 1920 — enables creation of pledge, hypothecation or lien in respect of Government securities, which means allowing individuals to these as collateral for borrowing purposes.

The Bill allows banks, which maintain a subsidiary general ledger (SGL) account with the Reserve Bank of India, to operate a constituent SGL on behalf an individual.

While the bank would be deemed to be the holder of such account, the constituent would, however, be a beneficial owner, who "shall be entitled to claim from the holder all the benefits and be subjected to all the liabilities in respect of Government securities held in the Constituent SGL account."

The Bill also provides for summary procedure for recognising title for Government securities up to Rs 1 lakh with enabling power to the Centre to enhance the same limit up to Rs 1 crore.

It also provides for suspension of the holders of SGL account from trading with the facility of that account in the event of misuse, holding of Government promissory notes (including treasury bills) by trusts and empower the RBI to call for information, cause inspection, issue directions and make regulations.

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