Sgl Facility Unlikely For Gilts Transactions Of Fiis

The Reserve Bank of India is not likely to extend subsidiary general ledger (SGL) facility to foreign institutional investors (FII) for undertaking their transactions in the government securities market.

This is expected to be part of the comprehensive guidelines governing investments by the FIIs in the gilts market, to be shortly announced by the RBI.

In order to attract higher inflows of foreign capital, FIIs were recently permitted to invest in government securities. Owing to the relatively high returns from the Indian gilts market, the FIIs had been lobbying for this segment to be opened to them. Accordingly, the government relaxed the guidelines governing the entry of 100 per cent dedicated FII debt funds.

If the FIIs are not allowed SGL facilities, they will have to route their transactions through institutions which have these facilities. In other words, through banks and primary dealers.

Such a development would mean additional business for these bodies, especially the primary dealers, who generally hold two SGL accounts