Value Free Transfer of Government Securities

A reference is invited to Notification No.183 dated September 05, 2011, regarding the Value Free Transfer (VFT) of Government Securities. Revisions were implemented in the Notifications dated October 29, 2018. Separate guidelines have been issued for VFT to enable more efficient operations in the Government Securities market. VFT of one security refers to the transfer of securities from one SGL/CSGL account to another SGL/CSGL account, without consideration. Such transfers may occur due to posting at margins or inter-depository transfers arising from trades. VFT is also necessary for the distribution of securities.

Permitted Transactions under Value Free Transfer

The following transactions are eligible for VFT of Government Securities:

Transfers on account of gifts and inheritance between one CSGL account and another.
Inter-depository transfers (between CSGL accounts of the depositories) arising from the following:
- Own account transfer of securities by investors/brokers holding accounts in more than one depository.
- Trades in the exchange between constituents of different depositories.
Transfer from CGSL accounts of clearing corporations to the CSGL account of depositories or to other CSGL holders for onward distribution of securities allotted during primary auction settlement.
Transfer of securities due to mergers and amalgamations.
Transfer of securities on account of a change in the custodian by Foreign Portfolio Investors, subject to SEBI approval.
Own account transfer of securities from SGL/CSGL accounts to a CSGL of the depositories, where there is no change in beneficiary ownership.
Gilt Account Holders' transfer of securities from one CSGL account to another to close one gilt account and open another with a different CSGL account holder.
Transfer related to margin requirement/collateral posting in the following cases:
- Margin/collateral transfer between Clearing Corporation of India Ltd (CCIL) and its members.
- Margin/collateral transfer under Credit Support Annexes (CSA) and the Global Master Repurchase Agreement (GMRA), provided that the margin/collateral is in a separate CSGL account with RBI's permission, accompanied by appropriate documentation.
Posting of Government securities as margin/collateral in all segments of recognized stock exchanges.

Permission for VFT for any other purpose may be granted on a case-by-case basis. Applications should be submitted to the Public Debt Office, Mumbai Regional Office, RBI, Fort, Mumbai - 400 001.

These guidelines are issued by the Bank under the powers conferred by Notifications dated October 29, 2018, on Subsidiary General Ledger Account, focusing on eligibility criteria and operational guidelines. They supersede earlier instructions. Any violations may trigger the provisions of Section 27 of the Government Securities Act, 2006 (38 of 2006), and may invite penalties as outlined in Section 30 of the Act.

You may be interested in learning more about procedures for specific types of business activities, such as registering partnerships or assigning trademarks. Additionally, consider understanding Advance Ruling in Customs which could be relevant to your securities and investment operations. For compliance and regulatory updates, you can explore GSTR-3B Return filings as part of your comprehensive business operations strategy.

Moreover, for those looking to establish different types of companies in India, information about Section 8 Company Registration might be beneficial.

In the context of mergers and acquisitions, the registration of producer companies in various states like Bihar can offer insights into regulatory proceedings.

Finally, if you're considering winding up a company, understanding the procedures can help ensure compliance with local and national laws.

Yours faithfully,Sd/-(A.Mangalagiri)Chief General Manager

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Frequently Asked Questions

Common questions about Value Free Transfer of Government Securities.

Value Free Transfer of Government Securities refers to the transfer of government securities from one SGL/CSGL account to another, without any consideration or payment. It facilitates various transactions such as posting margins, inter-depository transfers, and distribution of securities without affecting the ownership.

The eligible transactions for Value Free Transfer include transfers on account of gifts and inheritance, inter-depository transfers, transfers from clearing corporations for distribution of securities, transfers due to mergers and amalgamations, change of custodian by Foreign Portfolio Investors, own account transfers, transfer between CSGL accounts, posting of margins/collaterals, and posting of securities as margins on stock exchanges.

Yes, permission for Value Free Transfer can be granted for any other purpose on a case-to-case basis. Applications for the same can be submitted to the Public Debt Office, Mumbai Regional Office, RBI, Fort, Mumbai - 400 001.

Value Free Transfer facilitates more efficient operations in the Government Securities market by enabling seamless transfer of securities without consideration, thereby supporting various transactions such as margin posting, inter-depository transfers, and distribution of securities.

Yes, any violations of the conditions specified for Value Free Transfer shall attract provisions of Section 27 of the Government Securities Act, 2006, in addition to inviting penalties as provided in Section 30 of the same Act.

The guidelines for Value Free Transfer of Government Securities are issued by the Reserve Bank of India (RBI) in the exercise of the powers conferred under the relevant notifications on Subsidiary General Ledger Account and Constituents' Subsidiary General Ledger Account.

Yes, Foreign Portfolio Investors can use Value Free Transfer for transferring securities on account of changing their custodian, subject to approval by the Securities and Exchange Board of India (SEBI).

Yes, for posting margins/collaterals under Credit Support Annexes (CSA) and Global Master Repurchase Agreement (GMRA), the margins/collaterals should be held in a separate CSGL account opened with the permission of RBI, and appropriate documentation should be maintained.

Yes, Value Free Transfer can be used for transferring securities from CSGL accounts of clearing corporations to the CSGL accounts of depositories or other CSGL holders, for onward transfer to the clients for distribution of securities allotted during primary auction settlement.

Yes, Gilt Account Holders can transfer securities from one CSGL account to another CSGL account to close the gilt account with one CSGL account holder and open a new gilt account with another CSGL account holder using Value Free Transfer.