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RBI considering options to popularise govt securities

The Reserve Bank of India is considering a range of options to increase the interest of individual investors in government securities as there is an inherent potential for households to diversify their investment portfolio encompassing government securities, Reserve Bank Deputy Governor Dr Y V Reddy said on Thursday.

Delivering the inaugural address at a seminar, 'The Future of India's Debt Market 1997' in Bombay, he said to foster inter-institutional coordination, a technical advisory committee for government securities and a standing committee on money market have been set up. Major issues confronting the debt and money markets are being discussed by these committees, he informed.

Reddy further said, in order to boost the secondary market, the Reserve Bank is encouraging banks to open SGL-II accounts for constituents, thereby encouraging the coverage of book-entry holding of government securities.

Recently, the National Stock Exchange has been authorised to open an SGL-II account and current account with the RBI, Dr Reddy said. A decision has also been taken to extend similar facility to Stock Holding Corporation of India. These steps would further streamline transfer and settlement procedures in the government securities market, he said.

Reddy further said that a new act on government securities is proposed to take care of the investors, as the present act dates to the pre-Independence era.

This is no longer valid with almost over Rs 30,000 billion worth of other liabilities of government comprising inter alia instruments like NNS, and the Indira Vikas Patra, to name a few, falling outside the perview of the Public Debt Act 1944, there are other constraints such as those which preclude the RBI from issuing promissory notes in the name of trusts, non-availability of nomination facility in respect of government securities, barring minor from holding government securities. Various other amendments are required, he said.

Consistent with the spirit of financial sector reforms, Reddy stated that the RBI was in the process of divesting part of its shareholding of Discount Finance House of India and Securities Trading Corporation of India so that the RBI does not have majority share holding.

UNI