New directives to avoid G-Sec scam repeat

The Maharashtra government on Monday issued directions to all co-operative banks in the State under Section 79 A of the Maharashtra Co-opera...

The Maharashtra government on Monday issued directions to all co-operative banks in the State under Section 79 A of the Maharashtra Co-operative Societies Act, 1960 in a serious bid to bring in transparency in the G-Secs transactions and avoid the repeat of the scams like Home Trade.

The state government has warned that 8216;these guidelines should be followed scrupulously by the co-operative banks and the erring banks should be taken to task by the Registrar of Co-operative Societies as per the provisions of MaharashtraCo-operative Societies Act, 1960.8221; According to the government notification, the banks have been prohibited from undertaking any purchase/sale transactions with broking firms or other intermediaries on principal to principal basis. 8216;The banks should not take the help of broker while dealing with the G-Secs and all transactions must be monitored to see that delivery takes place on settlement day.8217;

The banks henceforth would be required to maintain their investments in G-Secs only in SGL accounts with RBI or in constituent SGL accounts of public sector banks, other scheduled commercial banks, state co-operative bank, primary dealers, depositors and Stock Holding Corporation of India Ltd. The banks would have to undertake a half yearly review of their investment portfolio which should, apart from other operational aspects of investment portfolios, clearly indicate and certify adherence to lay down internal investment policy and procedures and RBI guidelines and put up the same before their respective boards with a month -end of April and end of October.

The funds account and investment account should be reconciled on the same day before close of business. According to government notification, the banks would have to keep a proper record of the SGL forms received/issued to facilitate counter checking by their internal control systems/Nabard inspectors/government auditors. The banks have been restrained from undertaking interbank ready forward deals in dated government and approved/trustee securities.

All transactions in G-Secs for which SGL facility was available, should be put through SGL accounts only and no bank receipt be issued under any circumstance in respect of transactions in G-Secs for which SGL facilities are available.

On accounting standards, the government notification has said that all investment in securities other than approved securities be classified under the current category and be valued at market price or cost whichever is less and depreciation should be provided for the shortfall if any.