RBI pins riders on banks' gilt foray

The Reserve Bank of India (RBI) today proposed to link banks' participation in government securities market to profitability, capital adequacy and the level of non-performing assets (NPAs).

In its revised draft guidelines for the Constituent Subsidiary General Ledger (CSGL) Accounts, RBI said banks would need to comply with capital adequacy rules and have reported net profits for three consecutive years.

Additionally, the net NPAs of banks should not exceed 5 per cent of net advances. Under the revised norms, banks need to obtain from RBI a good composite credit rating that takes into account financial management, information technology systems and controls.

The provisions contained in the existing guidelines governing the market participants in G-Sec Market were not consistent with the fast changing scenario in the debt market,

The facility to maintain CSGL account by an eligible entity would be conditional upon strict adherence to the operational guidelines. The existing CSGL Account holder will have to comply with the basic as well as additional eligibility criteria as stipulated in guidelines.

State co-operative banks (SCBs), urban cooperative banks (UCBs) shall be required to obtain 'A' rating from the Supervisory Authority. The entity must have adequate information technology (IT) infrastructure and qualified persons to support the information processing facility with high degree of reliability integrity.

Besides, an effective and efficient business continuity plan should also be in place to take over and restart the entire business process within a least time period in case of any eventuality.