What changed
Previously, DvP III facility was not available for gilt account holder transactions. Now, RBI has extended DvP III to all such transactions, excluding those between gilt account holders of the same custodian.
What it means for you
Banks and custodians can now settle government securities trades for gilt account holders under DvP III, improving efficiency and reducing settlement risk. However, custodians must strictly enforce no short-selling and ensure adherence to RBI guidelines.
What you must do
- Update internal systems to enable DvP III settlement for gilt account holder transactions.
- Ensure custodians do not process sale transactions for gilt account holders without prior buy transactions or sufficient securities.
- Review and align operational procedures with RBI's extant guidelines for gilt account holder trades.
Who it affects
Custodians handling gilt account holder transactions, Gilt account holders, Market participants trading in government securities
What is DvP III and why is this extension important?
DvP III is a settlement method that nets trades on a continuous basis, reducing settlement risk. This extension allows gilt account holders to benefit from the same efficiency, except for trades between holders under the same custodian.
Are there any restrictions on gilt account holder transactions under this new facility?
Yes, transactions between gilt account holders of the same custodian are excluded. Also, custodians must not process sale transactions without prior buy transactions or clear securities balances.
What are the custodians' responsibilities under this circular?
Custodians must ensure all gilt account holder transactions comply with RBI guidelines and prevent any sale without adequate securities or prior purchases.