To prevent undesirable speculation in securities in the whole of India. - S.O. 2192(E) - SEBI

MINISTRY OF FINANCE (Department of Economic Affairs) (RESERVE BANK OF INDIA) NOTIFICATION Mumbai, the 8th January, 2010 S.O.2192(E).- In exercise of the powers conferred on the Reserve Bank of India under Section 16 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) vide Government or India Notification No. 183(E) dated 1 st March, 2000, issued under Section 29A of the said Act, the Reserve Bank of India- being of the opinion that it is necessary to prevent undesirable speculation in securities in the whole of India, hereby declares that- (A) no person in the territory to which that Act extends, shall, enter into any- (1) contract for the sale or-purchase of Government securities, gold related securities and money market securities other than-spot delivery contracts or such other contracts traded on a recognized stock exchange, as is permissible under the said Act, rules and bye-laws of such stock exchange. (i) Provided that contracts may be entered into on when issued basis in such Government securities and in accordance with such terms and conditions, including the basis on which such contracts may be settled, as may be specified in this regard by the Reserve Bank of India by the following persons - (a) a scheduled commercial bank (b) a Primary Dealer registered with the Reserve Bank of India (c) any Other person specifically permitted in this regard by Reserve Bank of India; (ii) Provided that ready forward contracts may be entered into in all Government securities, in accordance with the terms and conditions as may be specified by the Reserve Bank of India, by the following persons- (a) any person holding a Subsidiary General Ledger account with the Public Debt Office of the Reserve Bank of India; (b) a scheduled bank or a non-banking financial company registered with Reserve Bank of India (other than Government Companies as defined in Section 617 of the Companies Act, 1956 ) or a housing finance company registered with National Housing Bank, or a mutual fund registered with Securities and Exchange Board of India, or an insurance company registered with Insurance Regulatory and Development Authority, holding a Gilt account with any person permitted by Reserve Bank of India to maintain Constituent Subsidiary General Ledger account with Public Debt Office of the Reserve Bank of India; or (c) any other person specifically permitted by Reserve Bank of India, holding a Gilt account with any person permitted by Reserve Bank of India to maintain Constituent Subsidiary General Ledger account with Public Debt Office of the Reserve Bank of India. (iii) Provided further that no ready forward contracts may be entered into between two persons both maintaining Gilt accounts with same person maintaining Constituent Subsidiary General Ledger account with the Public Debt Office of the Reserve Bank of India. (iv) Provided further that no ready forward contracts may be entered into between a person maintaining Subsidiary General Ledger account with Public Debt Office of the Reserve Bank of India with another person maintaining a Gilt account with itself. (v) Provided further that all ready forward contracts shall be settled through Subsidiary General Ledger account or a Constituent Subsidiary General Ledger account maintained with the Public Debt Office of Reserve Bank of India, in accordance with the terms and conditions as may be specified by the Reserve Bank of India. (vi) Provided further that the outstanding ready forward contracts shall continue till termination of the contracts as per the contractual terms : (2) Ready forward contracts in bonds, debentures, debenture stock, securitised debt, and other debt securities issued by any person including any body corporate established by or under a Central or State Act : Provided that ready forward contracts may be entered into in corporate debt securities of specified rating in accordance with the terms and conditions as may be specified by the Reserve Bank of India by the following persons (a) a scheduled commercial bank excluding Regional Rural Banks (RRBs) and Local Area Banks (LABs) ; (b) a Primary Dealer registered with the Reserve Bank of India; (c) a non-banking financial company registered with the Reserve Bank of Indra (other than Government companies as defined in section 617 of the Companies Act, 1956 ); (d) Export-Import Bank of India established under the Export-Import Bank of India Act, 1981 (28 of 1981); (e) National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (68 of 1981); (f) National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987); (g) Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989); (h) any other person specifically permitted in this regard by the Reserve Bank of India. (B) the contracts specified in clause (A) above, entered into on the recognized stock exchanges, shall be entered in accordance with- (a) the rules or regulations or the bye-laws made under the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the directions issued by the Securities and Exchange Board of India under the said Acts; (b) the rules made or guidelines or directions issued under the Reserve Bank India Act, 1934 (2 of 1934) or the Banking Regulation Act, 1949 (10 of 1949) or the Foreign Exchange Management Act, 1999 (42 of 1999) by the Reserve Bank of India; and (c) the provisions contained in the notifications issued by the Reserve Bank of India under the Securities Contracts (Regulation) Act, 1956 (42 of 1956) . Explanation : For the purpose of this notification- I. scheduled bank means a bank included in the second schedule of Reserve Bank of India Act; 1934. II. non-banking financial company means a company as defined in clause (1) of Section 45-I of the Reserve Bank of India Act, 1934. III. mutual fund means a fund as defined in clause (q) of the Regulation 2 of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. IV. Constituent Subsidiary General Ledger account means a Subsidiary General Ledger account opened and maintained with the Public Debt Office of the Reserve Bank of India, by a bank or any other person permitted by the Reserve Bank of India, for the purpose of holding Government securities on behalf of its constituents. V. Gilt account means a securities account opened and maintained by any person with a bank or any other person permitted by the Reserve Bank of India to open and maintain Constituent Subsidiary General Ledger account with the Public Debt Office of the Reserve Bank of India. VI. Entering into contracts on when issued basis means entering into contracts after the notification of issue of any Government security but before the actual issue thereof. VII corporate debt securities means non-convertible debt securities, which create or acknowledge indebtedness, including debentures, bonds and such other securities of a company or a body corporate constituted by or under a Central or State Act. whether constituting a charge on the assets of the company or body corporate or not, but does not include debt securities issued by Government or such other persons as may be specified by the Reserve Bank, security receipts and securitized debt instruments . VIII. security receipt means a security as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002). IX. securitized debt instruments means securities of the nature referred to in sub-clause (ie) of clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) . This notification is issued by Reserve Bank of India, in supersession of the notification No. S.O. 551 (E), dated April 17, 2006 issued by it. [IDMD No. 06/2009-10/F.No. 1/8/SM/2010] H. R. KHAN, Executive Director