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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to apply to the Government securities to which the G S Act applies, while the Indian Securities Act, 1920 has been repealed.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.

11. Who is deemed to be the holder of the Government securities in CSGL account? +

A CSGL account holder shall be deemed to be the holder of the securities held in the respective account with RBI, however, the constituents i.e. GAHs, as the beneficial owners of the Government security held therein, shall be entitled to claim from the CSGL account holder all the benefits and be subjected to all the liabilities in respect of the Government securities held in the CSGL account.

12. What does one mean by BLA? +

A BLA or Bond Ledger Account means an account with RBI or an agency bank in which the Government securities are held in a dematerialized form to the credit of the holder. The investor in this case receives a Certificate of Holding or Certificate of Investment from RBI/Agency Banks.

13. Are the National Saving Certificates/Postal Saving Certificates also covered under the G S Act? +

No. They are not covered under the G S Act or the G S Regulations.

14. How can a Government security be transferred? +

Government security held in the form of GPN is transferable by endorsement and delivery, while a bearer bond is transferable by delivery and the person in possession of the bond shall be deemed to be the holder of the bond. Government securities held in the form of SC, SGL/CSGL and BLA are transferable, before maturity, by execution of forms - III, IV and V respectively, appended to the G S Regulations, provided that the same are eligible for transfer as per the specific Government Loan Notification. Further, these transfer forms may also be executed in electronic form under digital signature.

15. How does a person who is unable to write, execute or endorse a document? +

In such cases, he/she may apply to the Executive Magistrate to execute the document or make endorsement on his/her behalf after producing sufficient documentary evidence about his/her identity and satisfying the Executive Magistrate that he/she has understood the implications of such execution or endorsement.

16. Whether there has been any simplification in the process/documentation for recognition of title to Government security of deceased sole holder or joint holders? +

Yes. The title to Government security can now be recognised not only on the basis of a Succession Certificate issued under Part X of the Indian Succession Act, 1925 but also on the basis of a decree, order or direction passed by a competent court or on the basis of a certificate issued or order passed by any other authority who might have been empowered under any statute to confer on any such person a title to the Government security. Further, the title to Government security of deceased sole or joint holders may also be recognized by the RBI/Agency Banks on the basis of any one of the following six documents as prescribed in the G S Regulations.

a “Will” executed by the deceased holder of the Government security bequeathing thereby the security in favour of the person claiming title thereto, provided the probate issued in respect of such Will has been submitted to the Bank by the claimant; or
a registered deed of family settlement, wherein the Government security claimed has been included and given to the claimant; or
a gift deed executed in accordance with the law relating thereto, in respect of the Government security claimed; or
a deed of relinquishment executed by other legal heir or successor of the deceased in accordance with law in favour of the claimant in respect of the Government security claimed; or
a decree passed by a foreign court in respect of the Government security claimed, the execution whereof is permissible in accordance with the provisions of Section 44A of the Civil Procedure Code, 1908 (5 of 1908); or
a deed of partition executed and acted upon in accordance with law, wherein the Government security claimed has been included and given to the share allotted to the claimant.

17. Whether the G S Act provides for nomination facility? +

Yes. The G S Act provides for nomination facility for a Government security other than in the form of GPN and bearer bond. The sole holder or all the joint holders of such a Government security may nominate one or more persons, who in the event of death of the sole holder or the death of all the joint holders, would become entitled to the Government security and payment thereon.

18. What happens if one of the joint nominees to a Government security dies? +

In such cases where a nomination in respect of a Government security has been made in favour of two or more persons and either or any of the nominees is dead, the surviving nominee or nominees will be entitled to the Government security and payment thereon.

19. Whether a minor can be a nominee? +

Yes. A minor can be a nominee. However, the sole holder or all the joint holders of a Government security may appoint another individual, not being a minor, to receive the proceeds of the Government security on behalf of the nominee in the event of the death of the sole holder or all the joint holders during the minority of the nominee.

20. Does conversion, sub-division, renewal or issue of duplicate Government security affect the rights of the nominee(s)? +

No. The nominee(s) will continue to have the same rights and will be the nominees in respect of each new security issued in lieu of such Government security.