What changed
RBI observed inconsistent practices among banks—some used Trade Date, others Settlement Date for accounting government securities transactions. Now, all UCBs must uniformly follow Settlement Date accounting for both outright and ready forward purchases and sales. This replaces earlier circulars from June 2005 on ready forward contracts and settlement procedures.
What it means for you
Banks must align their accounting systems to record transactions on the actual settlement date, not the trade date. This ensures consistency in financial reporting and reduces discrepancies in investment valuation. Lenders need to update internal processes and train staff to avoid compliance gaps.
What you must do
- Switch accounting for all government securities transactions to Settlement Date basis immediately.
- Update internal policies and software to reflect Settlement Date accounting for outright and ready forward deals.
- Review past transactions to ensure no residual Trade Date practices remain.
- Communicate the change to treasury and accounts teams for consistent implementation.
Who it affects
Primary Urban Co-operative Banks, Treasury departments of UCBs, Accounts and compliance teams
Does this apply to all types of government securities transactions?
Yes, the circular covers both outright and ready forward purchase and sale transactions in Government Securities.
When does this instruction take effect?
The instruction is applicable with immediate effect from January 18, 2011.
What was the previous practice before this circular?
Banks were using either Trade Date or Settlement Date accounting inconsistently; this circular mandates uniform Settlement Date accounting.