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The Government Securities Act, 2006 and The Government Securities Regulations, 2007

Government securities offer the benefit of safety, liquidity and attractive returns to investors. With the enactment of the Government Securities Act, 2006 Government securities, including the Relief/Savings Bonds issued by the Government of India, have become more investor friendly. Investors of such bonds will particularly benefit from such changes in the Act. To create public awareness in this regard and as a customer friendly measure, the following Frequently Asked Questions (FAQs) along with the answers have been released by the Reserve Bank of India (RBI).

1. What does one mean by Government security? +

Government security (G-Sec) means a security created and issued by the Government for the purpose of raising a public loan or any other purpose as notified by the Government in the Official Gazette and having one of the following forms.

a Government Promissory Note (GPN) payable to or to the order of a certain person; or
a bearer bond payable to a bearer; or
a stock; or
a bond held in a Bond Ledger Account (BLA).

2. What is the Government Securities Act, 2006? +

The Government Securities Act, 2006 (G S Act) is an Act to consolidate and amend the laws relating to Government securities and its management by the RBI and for matters connected therewith.

3. What are the Government Securities Regulations, 2007? +

Government Securities Regulations, 2007 (G S Regulations) have been framed by the RBI to carry out the purposes of the G S Act.

4. When did the G S Act and the G S Regulations come into force and to which Government securities do they apply? +

The G S Act and the G S Regulations came into force with effect from December 1, 2007. The G S Act applies to Government securities created and issued by the Central Government or a State Government, whether before or after the commencement of this Act. The G S Act will apply to all Government securities created and issued even prior to December 1, 2007.

5. What about the applicability of the Public Debt Act, 1944 and the Indian Securities Act, 1920 to the Government securities? +

The Public Debt Act, 1944 shall cease to apply to the Government securities to which the G S Act applies, while the Indian Securities Act, 1920 has been repealed.

6. Are Relief/Savings Bonds also Government securities? Does the G S Act and the G S Regulations apply to them as well? +

Yes. Relief/Savings Bonds are also Government securities. They are issued in the form of Stock Certificate and BLA by the RBI and in the form of BLA by the Agency Banks. All the provisions of the G S Act and the G S Regulations apply to them as well. However, Relief/Savings Bonds may have certain features of their own as per the specific Government Loan Notification announcing their issue. For example, Savings Bonds are not transferable except as explained at Question No. 46 below.

7. Are all the above forms of Government securities issued by RBI as well as Agency banks? +

Government securities in the form of GPN, bearer bond, stock and BLA are issued by RBI, while the Agency Banks are presently eligible to issue Relief/Savings Bonds in the form of BLA only.

8. Who are eligible to invest in Government securities? +

The G S Act and the G S Regulations do not specify the eligibility criteria for investment in a G-Sec. The eligibility criteria are specified in the respective Government Notifications. Usually any person is eligible to invest in Government securities.

9. What does one mean by Government security in the form of Stock? +

Stock means a Government security registered in the books of RBI for which a Stock Certificate (SC) is issued or which are held at the credit of the holder in the Subsidiary General Ledger (SGL) account maintained in the books of RBI and transferable by registration in the books of RBI.

10. What does one mean by the CSGL account? +

CSGL, i.e. Constituents' Subsidiary General Ledger account, means an SGL account opened and maintained with RBI by an agent on behalf of the constituents of such agent, i.e. a second SGL account opened by an agent with the RBI to hold the securities on behalf of their constituents. The constituents are known as the Gilt Account Holders (GAHs). Additional CSGL and / or Gilt Account can be opened only with the prior / specific permission of the Bank.