What changed
Previously, only banks, primary dealers, and select institutions could directly access NDS-OM. Now, any entity legally required to invest in government securities—such as deposit-taking NBFCs, provident funds, pension funds, mutual funds, insurance companies, cooperative banks, regional rural banks, and trusts—can place orders through CSGL accounts maintained with NDS members (banks/PDs). Trades settle via the CSGL and current accounts of the NDS member.
What it means for you
This expands the investor base for government securities, increasing liquidity and depth in the secondary market. Banks and PDs acting as custodians must ensure only 'qualified' entities use this facility, adding compliance responsibility. It also streamlines access for smaller entities that previously lacked direct NDS-OM membership.
What you must do
- Verify that each gilt account holder meets the 'qualified entity' criteria before allowing NDS-OM orders.
- Implement a robust mechanism to confirm eligibility, as per RBI's caution on avoiding trades for non-qualified entities.
- Adhere to all existing guidelines for maintaining gilt accounts and constituent deals on NDS-OM.
- Ensure settlement processes for CSGL trades are correctly linked to the member's CSGL and current accounts.
Who it affects
Banks and Primary Dealers (NDS members), Deposit-taking NBFCs, Provident Funds and Pension Funds, Mutual Funds and Insurance Companies, Cooperative Banks and Regional Rural Banks, Trusts and other entities required to invest in government securities
What is the CSGL route on NDS-OM?
It allows entities that maintain gilt accounts with NDS members (banks/PDs) to place orders on the NDS-OM platform through those members, using the Constituent Subsidiary General Ledger (CSGL) facility for settlement.
Who qualifies as a 'qualified entity' under this circular?
Any entity legally or regulatorily required to invest in government securities, including deposit-taking NBFCs, provident funds, pension funds, mutual funds, insurance companies, cooperative banks, regional rural banks, and trusts.
What are the responsibilities of custodians (CSGL account holders)?
Custodians must ensure that only qualified entities use the CSGL route for NDS-OM trades and must establish mechanisms to verify eligibility before allowing orders.