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RBI Update – Introduction of Stripping and Reconstitution in State Government Securities (SGS) – 2025

RBI Update – Introduction of Stripping and Reconstitution in State Government Securities (SGS) – 2025

The Reserve Bank of India (“RBI”), vide Circular No. IDMD.RD.S390/10.18.060/2025-26,[1] dated June 12, 2025, has formally introduced the facility of stripping and reconstitution in State Government Securities (“SGS”), following earlier regulatory intent announced in the Statement on Developmental and Regulatory Policies dated August 7, 2019. This move extends the existing framework of Separate Trading of Registered Interest and Principal of Securities (STRIPS), which has been operational for eligible Central Government dated securities since April 1, 2010. The facility for stripping and reconstitution in SGS shall be operational with effective immediately.

1. Effective Implementation and Eligibility: The regulatory framework, notified via Gazette on May 29, 2025, permits the stripping and reconstitution of fixed coupon SGS/SDLs (State Development Loans) that satisfy the following criteria:

  1. Residual maturity of up to 14 (Fourteen) years; and
  2. Minimum outstanding stock of INR 1,000 crores (Indian Rupees One Thousand Crores Only) as on the stripping date; and
  3. Recognition as eligible investment for meeting Statutory Liquidity Ratio (SLR) requirements and transferability of the security

2. Operational Mechanism: Entities with Subsidiary General Ledger (SGL) accounts can place their stripping/reconstitution requests directly through the RBI’s e-Kuber platform. For Gilt Account Holders, such requests are to be routed through their custodians maintaining the Constituent SGL (CSGL) accounts, who will place the requests in e-Kuber on their behalf.

3. Nomenclature and Applicability of Existing Guidelines: The nomenclature and ISIN conventions applicable to STRIPS in SGS shall mirror those used for Central Government STRIPS, ensuring standardization across markets. All terms and conditions detailed in the RBI notifications dated October 16, 2009, and April 10, 2018, along with the operational circular dated March 25, 2010 (and subsequent amendments), shall apply mutatis mutandis to stripping/reconstitution in SGS.


[1] https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12867&Mode=0