The Reserve Bank of India (RBI) has said that it would slap fine on subsidiary general ledger (SGL) account holders, if they failed to settle transactions in government securities due to insufficient funds and securities. Such defaults are termed as SGL bouncing.
Under the graded penalty structure, the defaulting member will pay up to Rs 5 lakh as fine per instance. This regime would be effective for the first nine instances in a financial year, RBI said.
On the tenth default, the entity will be debarred from using the SGL account for short sales in government securities for the rest of the year.
RBI will examine if the account holder has made any improvement in the internal control systems, before granting permission to resume short sales using the SGL account in the next financial year.
All commercial banks have to invest a certain percentage of their liabilities (deposits) in government securities, which is called Statutory Liquidity Ratio.
These securities are parked in an account called subsidiary general ledger maintained with RBI. The main purpose of this account is the hold and trade in government securities.
