Eximkey - India Export Import Policy 2004 2013 Exim Policy
RBI Notification Circulars Master Circulars RBI/2004-2005/108 REF. DBS.FID No. C- 5 /01.02.00/2004-05 DT.09/08/2004

ANNEX-I
(Cf. Para 2.3.9)



Scheme for Non-competitive Bidding Facility in
the Auctions of Government Securities


I. Scope : With a view to encouraging wider participation and retail holding of Government securities it is proposed to allow participation on “non-competitive” basis in select auctions of dated Government of India securities. Accordingly, noncompetitive bids up to 5 percent of the notified amount will be accepted in the auctions of dated securities. The reserved amount will be within the notified amount.

II. Eligibility: Participation on a non-competitive basis in the auctions of dated GOI securities will be open to investors who satisfy the following:
    1. do not maintain current account (CA) or Subsidiary General Ledger (SGL) account with the Reserve Bank of India.

    Exceptions: Regional Rural Banks (RRBs), Urban Cooperative Banks (UCBs) and Non-banking Financial Companies (NBFCs) shall be covered under this Scheme in view of their statutory obligations.

    2. make a single bid for an amount not more than rupees one crore (face value) per auction

    3. submit their bid indirectly through any one bank or PD offering this scheme.

    Exceptions: Regional Rural Banks (RRBs), Urban Cooperative Banks (UCBs) and Non-banking Financial Companies (NBFCs) shall be eligible to submit their non-competitive bids directly.

III. Coverage: Subject to the conditions mentioned above, participation on “noncompetitive” basis is open to any person including firms, companies, corporate bodies, institutions, provident funds, trusts, and any other entity as may be prescribed by RBI. The minimum amount for bidding will be Rs.10,000 (face value) and thereafter in multiples in Rs.10,000 as hitherto for dated stocks.

IV. Other Operational Guidelines:
    1. It will not be mandatory for the retail investor to maintain a constituent subsidiary general ledger (CSGL) account with the bank or PD through whom they wish to participate. However, an investor can make only a single bid under this scheme. An undertaking to the effect that the investor is making only a single bid will have to be obtained and kept on record by the bank or PD.

    2. Each bank or PD on the basis of firm orders submit a single customer bid for the aggregate amount on the day of the auction. Details of individual customers viz. name, amount, etc shall be provided as an Annexure to the bid.

    3. Allotment under the non-competitive segment to the bank or PD will be at the weighted average rate of yield/price that will emerge in the auction on the basis of the competitive bidding. The securities will be issued to the bank or PD against payment on the date of issue irrespective of whether the bank or PD has received payment from their clients.

    4. In case the aggregate amount of bid is more than the reserved amount (5% of notified amount), pro rata allotment would be made. In case of partial allotments, it will be the responsibility of the bank or PD to appropriately allocate securities to their clients in a transparent manner.

    5. In case the aggregate amount of bids is less than the reserved amount, the shortfall will be taken to competitive portion.

    6. Security would be issued only in SGL form by RBI. RBI would credit either the main SGL account or the CSGL account of the bank or PD as indicated by them. The facility for affording credit to the main SGL account is for the sole purpose of servicing investors who are not their constituents. Therefore, the bank or PD would have to indicate clearly at the time of tendering the noncompetitive bids the amounts (face value) to be credited to their SGL account and the CSGL account. Delivery in physical form from the main SGL account is permissible at the instance of the investor subsequently.

    7. It will be the responsibility of the bank or the PD to pass on the securities to their clients. Except in extraordinary circumstances, the transfer of securities to the clients shall be completed within five working days from the date of issue.

    8. The bank or PD can recover upto six paise per Rs.100 as brokerage/commission/ service charges for rendering this service to their clients. Such costs may be built into the sale price or recovered separately from the clients. In case the transfer of securities is effected subsequent to the issue date of the security, the consideration amount payable by the client to the bank or PD would also include accrued interest from the date of issue.

    9. Modalities for obtaining payment from clients towards cost of the securities, accrued interest wherever applicable and brokerage/commission/service charges may be worked out by the bank or PD as per agreement with the client. It may be noted that no other costs such as funding costs should be built into the price or recovered from the client.

V. Banks and PDs will be required to furnish information relating to operations under the Scheme to the Reserve Bank of India (Bank) as may be called for from time to time within the time frame prescribed by the Bank.

VI. The aforesaid guidelines are subject to review by the Bank and accordingly, if and when considered necessary, the Scheme will be modified.




ANNEX II
(CF PARA 2.5.9)

FORMAT FOR DISCLOSURE IN THE “NOTES ON ACCOUNTS” IN THE
ANNUAL PUBLISHED REPORTS


A. Issuer categories in respect of investments made

(As on the date of the balance sheet)



Sr.No.


Issuer


Amount
Amount of
Investment made through Pvt.Placement"Below Investment" grade Securities HeldUnrated Securities HeldUnlisted Securities
(1)(2)(3)(4)(5)(6)(7)
1PSUs     
2FIs     
3Banks     
4Private Corporates     
5Subsidiaries/Joint Ventures     
6Others     
7# Provision held towards depreciation     
 Total*     


# Only aggregate amount of provision held to be disclosed in column 3.

* NOTES:

1. Total under column 3 should tally with the total of investments includedunder the following categories in the balance sheet:
    a. Shares

    b. Debentures & Bonds

    c. Subsidiaries/ joint ventures

    d. Others

2. Amounts reported under columns 4, 5, 6 and 7 above might not be mutuallyexclusive.

B. Non performing investments

ParticularsAmount (Rs. Crore)
Opening balance 
Additions during the year since 1st April 
Reductions during the above period 
Closing balance 
Total provisions held 


ANNEX-III
(Cf. Para 8.6)


Recommended Accounting Methodology for Uniform Accounting of
Repo / Reverse Repo transactions


a. The following accounts may be opened , viz. i) Repo Account, ii) Repo Price Adjustment Account, iii) Repo Interest Adjustment Account, iv) Repo Interest Expenditure Account, v) Repo Interest Income Account, vi) Reverse Repo Account, vii) Reverse Repo Price Adjustment Account, and viii) Reverse Repo Interest Adjustment Account.

b. The securities sold/ purchased under repo should be accounted for as an outright sale / purchase.

c. The securities should enter and exit the books at the same book value. For operational ease, the weighted average cost method, whereby the investment is carried in the books at their weighted average cost, may be adopted.

Repo

d. In a repo transaction, the securities should be sold in the first leg at market related prices and re-purchased in the second leg at the derived price. The sale and repurchase should be accounted in the Repo Account.

e. The balances in the Repo Account should be netted from the FI’s Investment Account for balance sheet purposes.

f. The difference between the market price and the book value in the first leg of the repo should be booked in Repo Price Adjustment Account. Similarly the difference between the derived price and the book value in the second leg of the repo should be booked in the Repo Price Adjustment Account.

Reverse repo

g. In a reverse repo transaction, the securities should be purchased in the first leg at prevailing market prices and sold in the second leg at the derived price. The purchase and sale should be accounted for in the Reverse Repo Account.

h. The balances in the Reverse Repo Account should be part of the Investment Account for balance sheet purposes and can be reckoned for SLR purposes (only for banks) if the securities acquired under reverse repo transactions are approved securities.

i. The security purchased in a reverse repo will enter the books at the market price (excluding broken period interest). The difference between the derived price and the book value in the second leg of the reverse repo should be booked in the Reverse Repo Price Adjustment Account.

Other aspects relating to Repo / Reverse Repo

j. In case the interest payment date of the security offered under repo falls within the repo period, the coupons received by the buyer of the security should be passed on to the seller on the date of receipt as the cash consideration payable by the seller in the second leg does not include any intervening cash flows.

k. The difference between the amounts booked in the first and second legs in the Repo / Reverse Repo Price Adjustment Account should be transferred to the Repo Interest Expenditure Account or Repo Interest Income Account, as the case may be.

l. The broken period interest accrued in the first and second legs will be booked in Repo Interest Adjustment Account or Reverse Repo Interest Adjustment Account, as the case may be. Consequently the difference between the amounts booked in this account in the first and second legs should be transferred to the Repo Interest Expenditure Account or Repo Interest Income Account, as the case may be.

m. At the end of the accounting period, for outstanding repos , the balances in the Repo / Reverse Repo Price Adjustment Account and Repo / Reverse repo Interest Adjustment Account should be reflected either under item VI - 'Others' under Schedule 11 - 'Other Assets' or under item IV 'Others (including Provisions)' under Schedule 5 - 'Other Liabilities and Provisions' in the Balance Sheet of banks, as the case may be. (The FIs may reflect the balances in the corresponding Heads of accounts in their balance sheet).

n. Since the debit balances in the Repo Price Adjustment Account at the end of the accounting period represent losses not provided for in respect of securities offered in outstanding repo transactions, it will be necessary to make a provision therefor in the Profit & Loss Account.

o. To reflect the accrual of interest in respect of the outstanding repo/ reverse repo transactions at the end of the accounting period, appropriate entries should be passed in the Profit and Loss account to reflect Repo Interest Income / Expenditure in the books of the buyer / seller, respectively, and the same should be debited / credited as an income / expenditure accrued but not due. Such entries passed should be reversed on the first working day of the next accounting period.

p. In respect of repos in interest bearing (coupon) instruments, the buyer would accrue interest during the period of repo. In respect of repos in discount instruments like Treasury Bills, the seller would accrue discount during the period of repo based on the original yield at the time of acquisition.

q. At the end of the accounting period the debit balances (excluding balances for repos which are still outstanding) in the Repo Interest Adjustment Account and Reverse Repo Interest Adjustment Account should be transferred to the Repo Interest Expenditure Account and the credit balances (excluding balances for repos which are still outstanding) in the Repo Interest Adjustment Account and Reverse Repo Interest Adjustment Account should be transferred to the Repo Interest Income Account.

r. Similarly, at the end of accounting period, the debit balances (excluding balances for repos which are still outstanding) in the Repo / Reverse Repo Price Adjustment Account should be transferred to the Repo Interest Expenditure Account and the credit balances (excluding balances for repos which are still outstanding) in the Repo / Reverse Repo Price Adjustment Account should be transferred to the Repo Interest Income Account.

s. Illustrative examples are given in Annex IV.

Annex-IV
(Cf. Para 8.6)

Illustrative examples for uniform accounting of Repo/Reverse repo transactions


A. Repo/ Reverse Repo of Coupon bearing security

1. Details of Repo in a coupon bearing security:


Security offered under Repo11.43% 2015 
Coupon payment dates7 August and 7 February 
Market Price of the security offered under Repo (i.e. price of the security in the first leg)Rs.113.00(1)
Date of the Repo19 January, 2003 
Repo interest rate7.75% 
Tenor of the repo3 days 
Broken period interest for the first leg*11.43%x162/360x100=5.1435(2)
Cash consideration for the first leg(1) + (2) = 118.1435(3)
Repo interest**118.1435x3/365x7.75%=0.0753(4)
Broken period interest for the second leg11.43% x 165/360x100=5.2388(5)
Price for the second leg(3)+(4)-(5) = 118.1435 + 0.0753 - 5.2388 = 112.98(6)
Cash consideration for the second leg(5)+(6) = 112.98 + 5.2388 = 118.2188(7)


* Computation of days based on 30/360 day count convention

** Computation of days based on Actual/365 day count convention applicable to money market instruments

2. Accounting for the seller of the security

We assume that the security was held by the seller at the book value (BV) of Rs.120.0000

First leg Accounting


 DebitCredit
Cash Repo Account118.1435120.0000 (Book value)
Repo Price Adjustment account7.0000 (Difference between BV & repo price) 
Repo Interest Adjustment account 5.1435


Second Leg Accounting


 DebitCredit
Repo Account
Repo Price Adjustment account
120.00007.02
(the difference between the BV and 2nd leg price)
Repo Interest Adjustment account Cash account5.2388118.2188


The balances in respect of the Repo Price Adjustment Account and Repo InterestAdjustment Account at the end of the second leg of repo transaction are transferred toRepo Interest Expenditure Account. In order to analyse the balances in theseaccounts, the ledger entries are shown below:

Repo Price Adjustment account
DebitCredit
Difference in price for the 1st leg7.00Difference in price for the 2nd leg7.02
Balance carried forward to Repo Interest Expenditure account0.02  
Total7.02Total7.02


Repo Interest Adjustment account


DebitCredit
Broken period interest for the 2nd leg5.2388Broken period interest for the 1st leg5.1435
  Balance carried forward to Repo Interest Expenditure account0.0953
Total5.2388Total5.2388


Repo Interest Expenditure Account


DebitCredit
Balance from Repo Interest Adjustment account0.0953Balance from Repo Price Adjustment account0.0200
  Balance carried forward to P & L a/c.0.0753
Total0.0953Total0.0953


3. Accounting for buyer of the security


When the security is bought, it will bring its book value with it. Hence market value isthe book value of the security.

First leg Accounting:


 DebitCredit
Reverse Repo Account113.0000 
Reverse Repo Interest Adjustment account5.1435 
Cash account 118.1435


Second Leg Accounting


 DebitCredit
Cash account118.2188 
Reverse Repo Price Adjustment account (Difference between the 1st and 2nd leg prices)0.0200 
Reverse Repo account 113.0000
Reverse Repo Interest Adjustment account 5.2388


The balances in respect of the Reverse Repo Interest Adjustment Account andReverse Repo Price adjustment account at the end of the second leg of reverse repoin these accounts are transferred to Repo Interest Income Account. In order toanalyse the balances in these two accounts, the ledger entries are shown below:

Reverse Repo Price Adjustment Account


DebitCredit
Difference in price of 1st & 2nd leg0.0200Balance to Repo Interest Income a/c.0.0200
Total0.0200Total0.0200


Reverse Repo Interest Adjustment Account


 Debit Credit
Broken period interest for the 1st leg5.1435Broken period interest for the 2nd leg5.2388
Balance carried forward to Repo Interest Income Account0.0953  
Total5.2388Total5.2388


Reverse Repo Interest Income Account


DebitCredit
Difference between the 1st & 2nd leg prices0.0200Balance from Reverse Repo Interest Adjustment account0.0953
Balance carried forward to P & L account0.0753  
Total0.0953Total0.0953


4. Additional accounting entries to be passed on a Repo / Reverse Repo transactionon a coupon bearing security, when the accounting period is ending on anintervening day.

Transaction Leg

1st leg

End of accounting period2nd leg
Dates19 Jan 0321 Jan 03*22 Jan 03


The difference in the clean price of the security between the first leg and the secondleg should be apportioned upto the Balance Sheet date and should be shown asRepo Interest Income / Expenditure in the books of the seller / buyer respectivelyand should be debited / credited as an income / expenditure accrued but not due. Thebalances under Income / expenditure accrued but not due should be taken to thebalance sheet

The coupon accrued by the buyer should also be credited to the Repo InterestIncome account. No entries need to be passed on " Repo / Reverse Repo priceadjustment account and Repo / Reverse repo interest adjustment account". Theillustrative accounting entries are shown below:

a) Entries in Seller’s books on January 21, 2003

Account HeadDebitCredit
Repo Interest Income account [Balances under the account to be transferred to P & L] 0.0133 ( Notional credit balance 0.0133 in the Repo Price Adjustment Account by way of apportionment of price difference for two days i.e. upto the balance sheet day)
Repo interest Income accrued but not due0.0133 


*21 January, 2003 is assumed to be the balance sheet date

b) Entries in Seller’s books on January 21, 2003

Account HeadDebitCredit
Repo interest income0.0133 
P & L a/c 0.0133


c) Entries in Buyer's Books on January 21, 2003

Account HeadDebitCredit
Repo interest income accrued but not due0.0502 
Repo Interest Income account [Balances under the account to be transferred to P & L] 0.0502 (Interest accrued for 3 days of Rs. 0.0635* - Apportionment of the difference in the clean price of Rs.0.0133)


*For the sake of simplicity the interest accrual has been considered for 2 days.

d) Entries in Buyer's Books on January 21, 2003

Account HeadDebitCredit
Repo interest income account0.0502 
P& L a/c 0.0502


The difference between the repo interest accrued by the seller and the buyer is onaccount of the accrued interest forgone by the seller on the security offered for repo.

B. Repo/ Reverse Repo of Treasury Bill

1. Details of Repo on a Treasury Bill


Security offered under RepoGOI 91 day Treasury Bill maturing on 28 February, 2003 
Price of the security offered under RepoRs.96.0000(1)
Date of the Repo19 January, 2003 
Repo interest rate7.75% 
Tenor of the repo3 days 
Total cash consideration for the first leg96.0000(2)
Repo interest0.0612(3)
Price for the second leg(2)+(3) = 96.0000 + 0.0612 = 96.0612
Cash consideration for the 2nd leg96.0612


2. Accounting for seller of the security

We assume that the security was held by the seller at the book value (BV) of Rs.95.0000

First leg Accounting:


 DebitCredit
Cash
Repo Account
96.000095.0000 (Book value)
Repo Price adjustment account 1.0000
(Difference between BV & repo price )


Second Leg Accounting


Repo Account
Repo Price adjustment account
95.0000
1.0612
(the difference between the BV and 2nd leg price)
 
Cash account 96.0612


The balances in respect of the Repo Price Adjustment Account at the end of thesecond leg of repo transaction are transferred to Repo Interest Expenditure Account.

In order to analyse the balances in this account, the ledger entries are shown:

Repo Price Adjustment account


DebitCredit
Difference in price for the 2nd leg1.0612Difference in price for the 1st leg1.0000
  Balance carried forward to Repo Interest Expenditure account0.0612
Total1.0612Total1.0612


Repo Interest Expenditure Account


DebitCredit
Balance from Repo Price Adjustment account0.0612Balance carried forward to P & L a/c.0.0612
Total0.0612Total0.0612


The Seller will continue to accrue the discount at the original discount rate during the period of the repo.

3. Accounting for buyer of the security

When the security is bought, it will bring its book value with it. Hence market value is the book value of the security.

First leg Accounting:


 DebitCredit
Reverse Repo Account96.0000 
Cash account 96.0000


Second Leg Accounting


 DebitCredit
Cash account96.0612 
Repo Interest Income account
(Difference between the 1st and 2nd leg prices)
 0.0612
Reverse Repo account 96.0000


The Buyer will not accrue for the discount during the period of the repo.

4. Additional accounting entries to be passed on a Repo / Reverse Repo transaction on a Treasury Bill, when the accounting period is ending on an intervening day.

Transaction Leg1st legB/S date2nd leg
Date19 Jan.0321 Jan.03*22 Jan.03


*21 January, 2003 is assumed to be the balance sheet date

a. Entries in Seller’s books on January 21, 2003

Account HeadDebitCredit
Repo Interest Expenditure account (after apportionment of repo interest for two days) [Balances under the account to be transferred to P & L]0.0408 
Repo interest expenditure accrued but not due 0.0408


b. Entries in Seller’s books on January 21, 2003

Account HeadDebitCredit
Repo interest expenditure account 0.0408
P & L a/c0.0408 


c. Entries in Buyer's Books on January 21, 2003

Account HeadDebitCredit
Repo interest income accrued but not due0.0408 
Repo Interest Income account [ Balances under the account to be transferred to P & L] 0.0408


d. Entries in Buyer's Books on January 21, 2003

Account HeadDebitCredit
Repo interest income account0.0408 
P & L a/c 0.0408


APPENDIX
Part A: List of circulars consolidated by the Master Circular


NoCircular No.DateSubjectPara No.
1.FIC No. 984-994/ 01.02.00 / 91-92June 23,1992Investment Portfolio- Transactions in SecuritiesEntire Circular
2.FIC No. 493-503/ 01.02.00 / 92-93January 4,1993Investment Portfolio- Transactions in SecuritiesEntire Circular
3.FIC.No. 937-947/01.02.00/93-94April 22,1994Monitoring the Activities of Subsidiaries / Mutual FundsEntire Circular
4.FIC. No. 551 /01.08.00/ 95-96 January 24, 1996Investment Portfolio- Transactions in Securities- Role of BrokersEntire Circular
5.FIC. No. 198 /01.08.00/ 96-97 September 2, 1996Investment Portfolio- Transactions in Securities Entire Circular
6.FIC. No. 7 /01.08.00/ 96-97February 19, 1997 Investment Portfolio- Transactions in SecuritiesEntire Circular
7.DBS.FID.No.23 /01.08.00/ 97-98January 20, 1998Investment Portfolio- Transactions in Securities- Role of BrokersEntire Circular
8.DBS.FID.No.40 /01.08.00/ 98-99April 28, 1999Issue of Sub-Ordinated Debt for Raising Tier II CapitalEntire Circular
9.DBS.FID.No.C-9 /01.02.00/ 2000-01November 9,2000Guidelines for Classification and Valuation of InvestmentsEntire Circular
10.DBS.FID.No. C-10 /01.02.00/ 2000-01November 22, 2000Investment Portfolio- Transactions in Securities- Role of BrokersEntire Circular
11.DBS.FID.No. C-6 /01.02.00/ 2001-02October 16, 2001Guidelines for Classification and Valuation of Investments-Clarifications/ ModificationsEntire Circular
12.DBS.FID.No. C-10 /01.02.00/ 2001-02February 1, 2002Treatment of Restructured accounts- ClarificationsPara 8 of Annex
13.DBS.FID.No. C-2 /01.02.00/ 2002-03July 18,2002Transactions in Government SecuritiesEntire Circular
14.DBS.FID No. C-3 /01.02.00/2002-03July 22,2002Guidelines for classification and valuation of investments - ClarificationsEntire Circular
15.IDMC/PDRS/ 3432 / 10.02.01/2002-03 February 21, 2003Ready Forward ContractsEntire Circular
16.IDMC.3810 /11.08.10 / 2002-03March 24, 2003Guidelines for uniform accounting for Repo / Reverse repo transactionsEntire Circular
17.IDMC. MSRD. 4801/ 06.01.03/2002-03June 3, 2003Guidelines on Exchange Traded Interest Rate Derivatives Entire Circular
18.DBS.FID No.C-16 /01.02.00/2002-03June 20, 2003Investment Portfolio - Transactions in Securities - Audit Review and Reporting System - ModificationsEntire Circular
19.DBS.FID.No.C-1/01.02.00/2003-04July 1, 2003Trading in Government of India Securities on Stock exchanges Entire Circular
20.DBS.FID.No.C-11 /01.02.00 /2003-04 January 8,2004Final guidelines on investment by the FIs in debt securities Entire Circular


Part B: List of other circulars containing instructions related / relevant to Investments now superceded

No.Circular No.DateSubject
1.FIC. No. 338 /01.08.00/ 95-96November 3, 1995Investment Portfolio- Classification of Investments Under ' Permanent and Current' Category
2.DBS.FID. No. 22 /01.02.00/ 97-98January 15, 1998Settlement of Institutional Transactions in the Depository
3.DBS.FID. No. 3 /01.02.00/ 99-00August 10, 1999Permission to Undertake Ready Forward Transactions
4.DBS.FID. No. C-15 /01.02.00/ 99-00April 8, 2000Ready Forward Transactions
5.DBS.FID.No. C-16 /01.02.00/ 2001-02May 14,2002Ready Forward Contracts- through CCI Ltd.


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