The Hindu Business Line : G-Secs get more investor-friendly

Mumbai, June 25 Government securities, including the relief or savings bonds issued by the Government of India, have now become more investor friendly with additional features such as automatic redemption facility and nomination facility.

In a press release issued on Wednesday, the RBI said that the holder of a G-Sec now has the facility to create pledge, hypothecation or lien in respect of such security.

Moreover, the procedure to recognise the title to a G-Sec of deceased holders has further been simplified and can now be done on the basis of any valid document admissible in a court of law.

These investor-friendly features have been added to Government Securities in the Government Securities Act, 2006 (Act) and the Government Securities Regulations, 2007 (Regulations) which came into effect from December 1, 2007. Investors of relief or savings bonds and holders of other G-Secs are likely to benefit from these changes.

Holders of G-Secs, including relief and savings bonds, can now simply give their bank details in an Electronic Clearing Services (ECS) mandate form to the Public Debt Offices, RBI, or to the agency bank which has issued the instruments. This will facilitate the receipt of the redemption amount of G-Secs and interest accrued thereon from time to time in their bank account.

Once the ECS mandate form is given to the RBI or agency banks, the holders will not have to separately submit physical discharge towards maturing G-Secs to receive the redemption amount. RBI or agency banks will automatically credit the holder’s account with the maturity proceeds. The facility of automatic redemption is applicable to all G-Secs held in the form of Stock Certificate, Bond Ledger Account and Subsidiary General Ledger Account (SGL).

Nomination

The new Act also provides the facility of nomination, of one or more persons, to the investors of G-Secs, including relief savings bonds, except those which are in the form of promissory notes and bearer bonds.

The other features of the Act that will facilitate deepening and widening of the G-Sec market are: Stripping and reconstitution of G-Sec, Legal recognition of beneficial ownership of the investors in G-Secs through the Constituents’ Subsidiary General Ledger (CSGL); and Statutory backing for the Reserve Bank’s power to debar Subsidiary General Ledger account holders from trading, either temporarily or permanently, for misuse of SGL account facility.

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