Home › Circulars › RBI/2008-09/187

Primary Auction Settlement: Fund Shortage Penalty

Current · Source: Reserve Bank of India · RBI/2008-09/187 · issued 19 Sep 2008 · ~1 min read
Quick answerRBI mandates that banks and primary dealers must fund primary auction settlements separately by 3:00 PM on settlement day, independent of secondary market receivables. Failure will be treated as SGL bouncing with penal action, effective September 22, 2008.
The rule, in the simplest words
How it plays out — a real example

A treasury officer in Indore, Rohan, ensures that the bank's RBI current account has sufficient funds by 3:00 PM on auction settlement days to meet primary auction obligations. He reviews the bank's internal processes to avoid SGL bouncing and associated penalties. Rohan educates the treasury team on the independence of primary and secondary market settlements to prevent future delays.

What changed

RBI observed entities relying on secondary market settlement receivables to fund primary auction obligations, causing delays. The circular clarifies that primary auction settlement is independent and must be funded separately. Same-day sale of allotted stock is for distribution, not to meet primary settlement fund requirements.

What it means for you

Banks and primary dealers must ensure sufficient funds in their RBI current account by 3:00 PM on auction settlement days. Shortages will be treated as SGL bouncing, attracting penal provisions. This tightens liquidity management for primary market participants.

What you must do

Who it affects

All banks participating in primary auctions, Primary dealers, Treasury and settlement operations teams

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What happens if we fail to fund the primary auction settlement by 3:00 PM?

The shortage will be treated as an instance of 'SGL bouncing' and will be subject to applicable penal provisions as per RBI norms.

Can we use proceeds from same-day sale of allotted stock to fund the primary auction settlement?

No. The same-day sale facility is meant for distribution and risk minimization, not to meet primary settlement fund requirements. Primary auction settlement must be funded separately.

When does this circular take effect?

The directive is effective from September 22, 2008.

📜 Read the original circular — full text as issued by RBI
RBI/2008-09/187 IDMD.PDRD.No. 1393/ 03.64.00/2008-09 September 19, 2008 All Banks and Primary Dealers Dear Sir, Settlement of Primary Auctions – Shortage of Funds It has been observed in the recent past that some of the entities are not meeting the fund requirements in time for smooth settlement of primary auction allotments. Often they are depending on their receivables from the secondary market settlement of securities through CCIL. You may note that the primary auction settlement is independent from the secondary market settlements and therefore has to be funded separately. The same day sale of allotted stock permitted vide our circular dated October 6, 2000 was to facilitate distribution of the stock and minimize the risk on the part of the allottees of the securities and not to meet the fund requirement of primary market settlements. 2. In view of the above, you are advised to make arrangements to provide sufficient funds in your current account with the RBI on the auction settlement days before 3.00 PM to meet your obligations against the subscriptions in the primary auctions, failing which the shortage will be treated as an instance of ‘SGL bouncing’ and will be subjected to the applicable penal provisions. This will be made effective from September 22, 2008. Yours faithfully, (R.N.Kar) General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/187 · issued 19 Sep 2008. The plain-English explanation above is BankPulse’s own independent summary.
🧰 Tools — save, print, templates & related
Most relevant forTreasury Team / ALMCompliance TeamRisk ManagementInternal AuditSenior Management / Board
🛠 Banker’s toolkit — checklists & reply templates →
Related circulars · Internal Debt Management
RBI Auction of State Government SecuritiesRBI Buyback of Government Securities: ₹20,000 Crore AuctionRBI Buyback Auction Results for Government SecuritiesRBI Buyback Auction Results for Government SecuritiesState Govt Securities Auction Results – July 28, 2026
Browse all departments →
Who does what — compliance checklist
⚙️ Operations
  • Arrange separate funding for primary auction settlements, not relying on secondary market receivables.
  • Ensure sufficient funds in your RBI current account by 3:00 PM on auction settlement days.
  • Educate treasury teams on the independence of primary and secondary market settlements.
📜 Compliance
  • Review internal processes to avoid SGL bouncing and associated penalties.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are an Operations officer at a bank this circular applies to (All banks participating in primary auctions, Primary dealers, Treasury and settlement operations teams), your first concrete step on “Primary Auction Settlement: Fund Shortage Penalty” is: “Arrange separate funding for primary auction settlements, not relying on secondary market receivables.” (RBI issued this 19 Sep 2008).

  1. Circular: RBI/2008-09/187 -- Primary Auction Settlement: Fund Shortage Penalty
  2. Issued: 19 Sep 2008
  3. Action required: Arrange separate funding for primary auction settlements, not relying on secondary market receivables.
  4. Action required: Ensure sufficient funds in your RBI current account by 3:00 PM on auction settlement days.
  5. Action required: Review internal processes to avoid SGL bouncing and associated penalties.
  6. Action required: Educate treasury teams on the independence of primary and secondary market settlements.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

💬 Banker Discussion

Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.

Loading comments…
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly).
Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4488&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
—