InvestorQ : How is the settlement of government securities done?
NISHA Nayak made post

How is the settlement of government securities done?

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vidhya Laxmi answered.
1 year ago

Settlement of Government Securities

Primary Market

Once the allotment process in the primary auction is finalized, the successful participants are advised of the consideration amounts that they need to pay to the government on the settlement day. The settlement cycle for dated security auctions is T+1, whereas that for T-bill auctions is T+2. On the settlement date, the fund accounts of the participants are debited by their respective consideration amounts, and their securities accounts (SGL accounts) are credited with the amount of securities that they were allotted.

Secondary Market

The transactions relating to government securities are settled through the member’s securities / current accounts maintained with the RBI, with the delivery of securities and the payment of funds done on a net basis. The Clearing Corporation of India Ltd. (CCIL) guarantees the settlement of trades on the settlement date by becoming a central counterparty to every trade through the process of novation i.e. it becomes the seller to the buyer and the buyer to the seller. All outright secondary market transactions in government securities are settled on a T+1 basis. However, in the case of repo transactions in government securities, the market participants will have the choice of settling the first leg on either a T+0 basis or a T+1 basis, as per their requirement