The Government of India has issued a notification permitting 35 non-banking entities, to undertake ready forward transactions in notified government securities with other entities for this purpose. The non-banking entities include primary dealers, dedicated gilt funds, mutual funds, insurance companies and some financial institutions.

It may be recalled that to improve the transmission mechanism of monetary policy and to further develop the money and debt markets in the light of the recommendations made by the Committee on the Financial System (Narasimham Committee), the Monetary and Credit Policy of April 1999 had announced that the repo market would be developed with appropriate regulatory safeguards.

Accordingly, it was decided to allow UTI, LIC and other non-bank participants in the money market which were earlier permitted only reverse repo, to now undertake ready forward transactions, facilitating their access to short term liquidity and better cash management. It was also decided that the mutual funds that have set up dedicated funds for Government securities would also be permitted to undertake ready forward transactions. It was, however, necessary for the government to India to issue a notification permitting non-banking entities to enter the ready forward market.

The Government of India had, therefore, been requested to issue a notification permitting the non-banking entities, as also certain new primary dealers, to take up ready forward transactions in notified Government Securities.

As per the government notification issued on July 14, 1999, the following non-banking entities have been permitted to undertake ready forward transactions in notified government securities:

Canbank Mutual Fund

Export Credit Guarantee Corporation of India Limited

Export Import Bank of India

General Insurance Corporation of India

GIC Mutual Fund

Indian Bank Mutual Fund

Industrial Credit & Investment Corporation of India Limited

Industrial Development Bank of India

IDBI Mutual Fund

ITC Thread Needle Mutual Fund

Life Insurance Corporation of India

National Bank for Agriculture and Rural Development

National Housing Bank

New India Assurance Company Limited

Oriental Insurance Company Limited

Reliance Capital Mutual Fund

SBI Mutual Fund

Small Industries Development Bank of India

Unit Trust of India

LIC Mutual Fund

J.M.Mutual Fund

Birla Mutual Fund

Kothari Pioneer Mutual Fund

Jardine Fleming Mutual Fund

Kotak Mahindra Mutual Fund

JP Morgan Securities India Private Limited

ABN AMRO Securities (India) Pvt. Limited

Deutsche Securities (India) Private Limited

Industrial Investment Bank of India Limited

Bank of India Mutual Fund

Sun F & C Mutual Fund

Prudential ICICI Mutual Fund

Housing Development Finance Corporation Limited

Stock Holding Corporation of India Limited

SICOM Limited

The entities can take up ready forward transactions provided:

1. Ready forward deals are undertaken only at Mumbai in Treasury Bills of all maturities issued by the Government of India and in such dated securities of Government of India as are approved by the Reserve Bank of India in consultation with the Central Government.
2. Such transactions are put through Subsidiary General Ledger (SGL) Accounts with Reserve Bank of India, Mumbai.

Alpana Killawala
General Manager

Press Release : 1999-2000/99