The Reserve Bank of India (RBI) on June 12 allowed Separate Trading of Registered Interest and Principal of Securities (STRIPS) in State Government Securities (SGS).
This decision was taken based on consultation with the State Governments/Union Territories and the feedback received from market participants, RBI said in a release.
STRIPS are basically "zero-coupon" securities where the investor receives a payment at maturity only. STRIPS allow investors to hold and trade the individual interest and principal components of eligible Government securities as separate securities of varying tenure.
The central bank said all fixed coupon securities issued by State Governments/Union Territories having a residual maturity of up to 14 years and minimum outstanding of Rs 1,000 crore as on the day of stripping, provided that such securities are reckoned as eligible investment for the purpose of meeting Statutory Liquidity Ratio (SLR) requirements and are transferable.
For placing the request for the stripping, market participants with SGL account with the RBI can place requests directly in Reserve Bank of India Core Banking Solution (e-Kuber system).
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