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1. S&P BSE SENSEX ­ The Barometer of Indian Capital Markets
Introduction
S&P BSE SENSEX, first compiled in 1986, was calculated on a "Market Capitalization­Weighted"
methodology of 30 component stocks representing large, well­established and financially sound companies
across key sectors. The base year of S&P BSE SENSEX was taken as 1978­79. S&P BSE SENSEX today
is widely reported in both domestic and international markets through print as well as electronic media. It is
scientifically designed and is based on globally accepted construction and review methodology. Since
September 1, 2003, S&P BSE SENSEX is being calculated on a free­float market capitalization
methodology. The "free­float market capitalization­weighted" methodology is a widely followed index
construction methodology on which majority of global equity indices are based; all major index providers like
MSCI, FTSE, STOXX, and Dow Jones use the free­float methodology.
The growth of the equity market in India has been phenomenal in the present decade. Right from early
nineties, the stock marketwitnessed heightened activity in terms of various bull and bear runs. In the late
nineties, the Indian market witnessed a huge frenzy in the 'TMT' sectors. More recently, real estate caught
the fancy of the investors. S&P BSE SENSEX has captured all these happenings in the most judicious
manner. One can identify the booms and busts of the Indian equity market through S&P BSE SENSEX. As
the oldest index in the country, it provides the time series data over a fairly long period of time (from 1979
onwards). Small wonder, the S&P BSE SENSEX has become one of the most prominent brands in the
country.
For Factsheet: Click here
Index Specification:
Base Year 1978­79
Base Index Value 100
Date of Launch 01­01­1986
Method of calculation Launched on full market capitalization method and effective September 01, 2003,
calculation method shifted to free­float market capitalization.
Number of scrips 30
Index calculation
frequency
Real Time
Index calculation and
Maintenance
Click here for Index calculation and maintenance
Historical Notices
Click to search Historical Notices on Index Replacements
S& BSE SENSEX Calculation Methodology
S&P BSE SENSEX is calculated using the "Free­float Market Capitalization" methodology, wherein, the
level of index at any point of time reflects the free­float market value of 30 component stocks relative to a
base period. The market capitalization of a company is determined by multiplying the price of its stock by
the number of shares issued by the company. This market capitalization is further multiplied by the free­float
factor to determine the free­float market capitalization.
The base period of S&P BSE SENSEX is 1978­79 and the base value is 100 index points. This is often
indicated by the notation 1978­79=100. The calculation of S&P BSE SENSEX involves dividing the free­float
market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the
only link to the original base period value of the S&P BSE SENSEX. It keeps the Index comparable over
time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of

2. scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by
the trading system to calculate S&P BSE SENSEX on a continuous basis.
S&P BSE Dollex­30
BSE also calculates a dollar­linked version of S&P BSE SENSEX and historical values of this index are
available since its inception. (For more details click 'Dollex series of BSE indices')
S&P BSE SENSEX ­ Scrip Selection Criteria
Eligible Companies. All common equities listed at BSE Ltd (excluding companies classified in Z group,
listed mutual funds, companies suspended on the last day of the month prior to review date, stocks
objected to by the Surveillance Department of BSE Ltd. and those that are traded under a permitted
category and SME category) are considered eligible.
Listing History. Stocks must have a listing history of at least three months at BSE, with the following
exceptions:
• An exception may be granted if the average float market capitalization of a newly listed company ranks
in the top 10 of all companies listed at BSE. In such cases, the minimum listing history required is at least
one month.
• In the event that a company is listed due to a merger/demerger/amalgamation, a minimum listing history
is not required.
Trading Days. The stock must have traded on every trading day at BSE during the three month reference
period. Exceptions may be made for extreme reasons such as stock suspension.
Revenue. Eligible companies must have reported revenue in the last four quarters from core activities.
Index Construction. Companies meeting the eligibility factors above are ranked based on their average
three month float market capitalization. The top 75 are identified.
All companies meeting the eligibility factors are then ranked again based on their average three month total
market capitalization. The top 75 are identified.
All stocks identified based on both float and total market capitalizations are then combined and sorted
based on their average three month value traded. Stocks with a cumulative value traded greater than 98%
are excluded.
The remaining stocks are then sorted by float market capitalization. Stocks with a weight of less than 0.5%
are excluded.
All remaining stocks are classified by sector and then sorted in descending order of rank by float market
capitalization. These stocks make up the replacement pool, to be included in the index if an existing
constituent is removed.
During periodic review, index constituents no longer meeting the float market capitalization, total market
capitalization, cumulative value traded, and minimum weight criteria are removed and replaced with
candidates from the replacement pool.
Industry/Sector Representation. Stock selection generally attempts to maintain index sector weights that
are broadly in­line with the overall market.

3. Constituent Weightings. Every stock is weighted in the index based on its float adjusted market
capitalization
Note:
BSE and S&P Dow Jones Indices (S&P DJI) have entered into an alliance to calculate, disseminate, and
license the widely followed suite of BSE indices from February 19, 2013, pursuant to which the corporate
action policy for all S&P BSE Indices will be implemented in line with that of prevailing S&P DJI policy.
For S&P DJI Policy: Click Here
Understanding Free­float Methodology
Concept
Free­float methodology refers to an index construction methodology that takes into consideration only the
free­float market capitalization of a company for the purpose of index calculation and assigning weight to
stocks in the index. Free­float market capitalization takes into consideration only those shares issued by
the company that are readily available for trading in the market. It generally excludes promoters' holding,
government holding, strategic holding and other locked­in shares that will not come to the market for trading
in the normal course. In other words, the market capitalization of each company in a free­float index is
reduced to the extent of its readily available shares in the market.
Subsequently all S&P BSE indices with the exception of S&P BSE­PSU index have adopted the free­float
methodology.
Major advantages of Free­float Methodology
∙ A Free­float index reflects the market trends more rationally as it takes into consideration only those
shares that are available for trading in the market.
∙ Free­float Methodology makes the index more broad­based by reducing the concentration of top few
companies in Index.
∙ A Free­float index aids both active and passive investing styles. It aids active managers by enabling
them to benchmark their fund returns vis­Ã ­vis an investible index. This enables an apple­to­apple
comparison thereby facilitating better evaluation of performance of active managers. Being a perfectly
replicable portfolio of stocks, a Free­float adjusted index is best suited for the passive managers as it
enables them to track the index with the least tracking error.
∙ Free­float Methodology improves index flexibility in terms of including any stock from the universe of
listed stocks. This improves market coverage and sector coverage of the index. For example, under a
Full­market capitalization methodology, companies with large market capitalization and low free­float cannot
generally be included in the Index because they tend to distort the index by having an undue influence on
the index movement. However, under the Free­float Methodology, since only the free­float market
capitalization of each company is considered for index calculation, it becomes possible to include such
closely­held companies in the index while at the same time preventing their undue influence on the index
movement.
∙ Globally, the Free­float Methodology of index construction is considered to be an industry best practice
and all major index providers like MSCI, FTSE, S&P and STOXX have adopted the same. MSCI, a leading
global index provider, shifted all its indices to the Free­float Methodology in 2002. The MSCI India Standard
Index, which is followed by Foreign Institutional Investors (FIIs) to track Indian equities, is also based on the
Free­float Methodology. NASDAQ­100, the underlying index to the famous Exchange Traded Fund (ETF) ­
QQQ is based on the Free­float Methodology.

4.
Definition of Free­float
Shareholding of investors that would not, in the normal course come into the open market for trading are
treated as 'Controlling/ Strategic Holdings' and hence not included in free­float. Specifically, the following
categories of holding are generally excluded from the definition of Free­float:
∙ Shares held by founders/directors/ acquirers which has control element
∙ Shares held by persons/ bodies with "Controlling Interest"
∙ Shares held by Government as promoter/acquirer
∙ Holdings through the FDI Route
∙ Strategic stakes by private corporate bodies/ individuals
∙ Equity held by associate/group companies (cross­holdings)
∙ Equity held by Employee Welfare Trusts
∙ Locked­in shares and shares which would not be sold in the open market in normal course.
The remaining shareholders fall under the Free­float category.
Determining Free­float Factors of Companies
BSE has designed a Free­float format, which is filled and submitted by all index companies on a quarterly
basis. (Format available on www.bseindia.com). BSE determines the Free­float factor for each company
based on the detailed information submitted by the companies in the prescribed format. Free­float factor is a
multiple with which the total market capitalization of a company is adjusted to arrive at the Free­float market
capitalization. Once the Free­float of a company is determined, it is rounded­off to the higher multiple of 5
and each company is categorized into one of the 20 bands given below. A Free­float factor of say 0.55
means that only 55% of the market capitalization of the company will be considered for index calculation.
Free­float Bands:
% Free­Float Free­Float Factor % Free­Float Free­Float Factor
>0 ­ 5% 0.05 >50 ­ 55% 0.55
>5 ­ 10% 0.10 >55 ­ 60% 0.60
>10 ­ 15% 0.15 >60 ­ 65% 0.65
>15 ­ 20% 0.20 >65 ­ 70% 0.70
>20 ­ 25% 0.25 >70 ­ 75% 0.75
>25 ­ 30% 0.30 >75 ­ 80% 0.80
>30 ­ 35% 0.35 >80 ­ 85% 0.85
>35 ­ 40% 0.40 >85 ­ 90% 0.90
>40 ­ 45% 0.45 >90 ­ 95% 0.95
>45 ­ 50% 0.50 >95 ­ 100% 1.00
Index Closure Algorithm

5. The closing S&P BSE SENSEX on any trading day is computed taking the weighted average of all the
trades on S&P BSE SENSEX constituents in the last 30 minutes of trading session. If a S&P BSE
SENSEX constituent has not traded in the last 30 minutes, the last traded price is taken for computation of
the Index closure. If a S&P BSE SENSEX constituent has not traded at all in a day, then its last day's
closing price is taken for computation of Index closure. The use of Index Closure Algorithm prevents any
intentional manipulation of the closing index value.
Maintenance of S&P BSE SENSEX
One of the important aspects of maintaining continuity with the past is to update the base year average. The
base year value adjustment ensures that replacement of stocks in Index, additional issue of capital and
other corporate announcements like 'rights issue' etc. do not destroy the historical value of the index. The
beauty of maintenance lies in the fact that adjustments for corporate actions in the Index should not per se
affect the index values.
On­Line Computation of the Index
During trading hours, value of the Index is calculated and disseminated on real time basis. This is done
automatically on the basis of prices at which trades in Index constituents are executed.
Index Review Frequency
In case of a revision in the Index constituents, the announcement of the incoming and outgoing scrips is
usually made one month in advance of the actual implementation of the revision of the Index.

6. BASICS OF DEBT MARKETS
1. Q. What is the Debt Market?
A. The Debt Market is the market where fixed income securities of various types and features are issued and
traded. Debt Markets are therefore, markets for fixed income securities issued by Central and State
Governments, Municipal Corporations, Govt. bodies and commercial entities like Financial Institutions,
Banks, Public Sector Units, Public Ltd. companies and also structured finance instruments.
2. Q. What is the Money Market?
A. The Money Market is basically concerned with the issue and trading of securities with short term
maturities or quasi­money instruments. The Instruments traded in the money­market are Treasury Bills,
Certificates of Deposits (CDs), Commercial Paper (CPs), Bills of Exchange and other such instruments of
short­term maturities (i.e. not exceeding 1 year with regard to the original maturity)
3. Q. Why should one invest in fixed income securities?
A. Fixed Income securities offer a predictable stream of payments by way of interest and repayment of
principal at the maturity of the instrument. The debt securities are issued by the eligible entities against
the moneys borrowed by them from the investors in these instruments. Therefore, most debt securities
carry a fixed charge on the assets of the entity and generally enjoy a reasonable degree of safety by way of
the security of the fixed and/or movable assets of the company.
● The investors benefit by investing in fixed income securities as they preserve and increase their
invested capital and also ensure the receipt of regular interest income.
● The investors can even neutralize the default risk on their investments by investing in Govt. securities,
which are normally referred to as risk­free investments due to the sovereign guarantee on these
instruments.
● The prices of Debt securities display a lower average volatility as compared to the prices of other
financial securities and ensure the greater safety of accompanying investments.
● Debt securities enable wide­based and efficient portfolio diversification and thus assist in portfolio
risk­mitigation.
4. Q. What are the advantages of investing in Government Securities (G­Secs)?
A. The Zero Default Risk of the G­Secs. offer one of the best reasons for investments in G­secs so that it
enjoys the greatest amount of security possible. The other advantages of investing in G­ Secs are:
● Greater safety and lower volatility as compared to other financial instruments.
● Variations possible in the structure of instruments like Index linked Bonds, STRIPS
● Higher leverage available in case of borrowings against G­Secs.

7. ● No TDS on interest payments
● Tax exemption for interest earned on G­Secs. up to Rs.3000/­ over and above the limit of Rs.12000/­
under Section 80L (as amended in the latest Budget).
● Greater diversification opportunities
● Adequate trading opportunities with continuing volatility expected in interest rates the world over
5. Q. Who can issue fixed income securities?
A. The Zero Default Risk of the G­Secs. offer one of the best reasons for investments in G­secs so that it
enjoys the greatest amount of security possible. The other advantages of investing in G­ Secs are:
● Greater safety and lower volatility as compared to other financial instruments.
● Variations possible in the structure of instruments like Index linked Bonds, STRIPS
● Higher leverage available in case of borrowings against G­Secs.
● No TDS on interest payments
● Tax exemption for interest earned on G­Secs. up to Rs.3000/­ over and above the limit of Rs.12000/­
under Section 80L (as amended in the latest Budget).
● Greater diversification opportunities
● Adequate trading opportunities with continuing volatility expected in interest rates the world over
6. Q. What are the different types of instruments, which are normally traded in this market?
A. FixedThe instruments traded can be classified into the following segments based on the characteristics of
the identity of the issuer of these securities:
The G­secs are referred to as SLR securities in the Indian markets as they are eligible securities for the
maintenance of the SLR ratio by the Banks. The other non­Govt securities are called Non­SLR securities.
7. Q. What are the different types of instruments, which are normally traded in this market?
A. The key role of the debt markets in the Indian Economy stems from the following reasons:
● Efficient mobilization and allocation of resources in the economy
● Financing the development activities of the Government
● Transmitting signals for implementation of the monetary policy
● Facilitating liquidity management in tune with overall short term and long term objectives.

8.
Since the Government Securities are issued to meet the short term and long term financial needs of the
government, they are not only used as instruments for raising debt, but have emerged as key instruments
for internal debt management, monetary management and short term liquidity management.
The returns earned on the government securities are normally taken as the benchmark rates of returns
and are referred to as the risk free return in financial theory. The Risk Free rate obtained from the G­sec
rates are often used to price the other non­govt. securities in the financial markets.
8. Q. What are the benefits of an efficient Debt Market to the financial system and the economy?
A. The following are the risks associated with debt securities:
● Reduction in the borrowing cost of the Government and enable mobilization of resources at a
reasonable cost.
● Provide greater funding avenues to public­sector and private sector projects and reduce the pressure
on institutional financing.
● Enhanced mobilization of resources by unlocking illiquid retail investments like gold.
● Development of heterogeneity of market participants
● Assist in development of a reliable yield curve and the term structure of interest rates.
9. Q. What are the benefits of an efficient Debt Market to the financial system and the economy?
A. The following are the risks associated with debt securities:
● Default Risk: This can be defined as the risk that an issuer of a bond may be unable to make timely
payment of interest or principal on a debt security or to otherwise comply with the provisions of a
bond indenture and is also referred to as credit risk.
● Interest Rate Risk: can be defined as the risk emerging from an adverse change in the interest rate
prevalent in the market so as to affect the yield on the existing instruments. A good case would be an
upswing in the prevailing interest rate scenario leading to a situation where the investors' money is
locked at lower rates whereas if he had waited and invested in the changed interest rate scenario, he
would have earned more.
● Reinvestment Rate Risk: can be defined as the probability of a fall in the interest rate resulting in a
lack of options to invest the interest received at regular intervals at higher rates at comparable rates
in the market.

9.
The following are the risks associated with trading in debt securities:
● Counter Party Risk: is the normal risk associated with any transaction and refers to the failure or
inability of the opposite party to the contract to deliver either the promised security or the sale­value at
the time of settlement.
● Price Risk: refers to the possibility of not being able to receive the expected price on any order due to
a adverse movement in the prices.
MARKET STRUCTURE
10. Q. What is the trading structure in the Wholesale Debt Market?
A. The Debt Markets in India and all around the world are dominated by Government securities, which
account for between 50 ­ 75% of the trading volumes and the market capitalization in all markets.
Government securities (G­Secs) account for 70 ­ 75% of the outstanding value of issued securities and
90­95% of the trading volumes in the Indian Debt Markets. State Government securities & Treasury Bills
account for around 3­4 % of the daily trading volumes. The trading activity in the G­Sec. Market is also very
concentrated currently (in terms of liquidity of the outstanding G­Secs.) with the top 10 liquid securities
accounting for around 70% of the daily volumes.
11. Q. Who regulates the fixed income markets?
A. Traditionally, the Banks have been the largest category of investors in G­secs accounting for more than
60% of the transactions in the Wholesale Debt Market.
The Banks are a prime and captive investor base for G­secs as they are normally required to maintain
25% of their net time and demand liabilities as SLR but it has been observed that the banks normally invest
10% to 15% more than the normal requirement in Government Securities because of the following
requirements:­
● Risk Free nature of the Government Securities
● Risk Free nature of the Government Securities
● Greater returns in G­Secs as compared to other investments of comparable nature
12. Q. What is the trading structure in the Wholesale Debt Market?
A. The issue and trading of fixed income securities by each of these entities are regulated by different
bodies in India. For eg: Government securities and issues by Banks, Institutions are regulated by the RBI.
The issue of non­government securities comprising basically issues of Corporate Debt is regulated by
SEBI.
13. Q. What are the main features of G­Secs and T­Bills in India?

10.
A. All G­Secs in India currently have a face value of Rs.100/­ and are issued by the RBI on behalf of the
Government of India. All G­Secs are normally coupon (Interest rate) bearing and have semi­annual coupon or
interest payments with a tenor of between 5 to 30 years. This may change according to the structure of the
Instrument.
Eg: a 11.50% GOI 2005 security will carry a coupon rate(Interest Rate) of 11.50% p.a. on a face value per
unit of Rs.100/­ payable semi­annually and maturing in the year 2005.
Treasury Bills are for short­term instruments issued by the RBI for the Govt. for financing the temporary
funding requirements and are issued for maturities of 91 Days and 364 Days. T­Bills have a face value of
Rs.100 but have no coupon (no interest payment). T­Bills are instead issued at a discount to the face value
(say @ Rs.95) and redeemed at par (Rs.100). The difference of Rs. 5 (100 ­ 95) represents the return to the
investor obtained at the end of the maturity period.
State Government securities are also issued by RBI on behalf of each of the state governments and are
coupon­bearing bonds with a face value of Rs.100 and a fixed tenor. They account for 3­4 % of the daily
trading volumes.
14. Q. What are the segments in the secondary debt market?
A. The segments in the secondary debt market based on the characteristics of the investors and the
structure of the market are:
● Wholesale Debt Market ­ where the investors are mostly Banks, Financial Institutions, the RBI,
Primary Dealers, Insurance companies, MFs, Corporates and FIIs.
● Retail Debt Market involving participation by individual investors, provident funds, pension funds,
private trusts, NBFCs and other legal entities in addition to the wholesale investor classes.
15. Q. What is the structure of the Wholesale Debt Market?
A. The Debt Market is today in the nature of a negotiated deal market where most of the deals take place
through telephones and are reported to the Exchange for confirmation. It is therefore in the nature of a
wholesale market.
16. Q. Who are the most prominent investors in the Wholesale Debt Market in India?
A. The Commercial Banks and the Financial Institutions are the most prominent participants in the
Wholesale Debt Market in India. During the past few years, the investor base has been widened to include
Co­operative Banks, Investment Institutions, cash rich corporates, Non­Banking Finance companies, Mutual
Funds and high net­worth individuals. FIIs have also been permitted to invest 100% of their funds in the debt
market, which is a significant increase from the earlier limit of 30%. The government also allowed in 1998­99 the
FIIs to invest in T­bills with a view towards broad basing the investor base of the same.
17. Q. What is the issuance process of G­secs?

11. A. G­secs are issued by RBI in either a yield­based (participants bid for the coupon payable) or price­based
(participants bid a price for a bond with a fixed coupon) auction basis. The Auction can be either a Multiple
price (participants get allotments at their quoted prices/yields) Auction or a Uniform price (all participants get
allotments at the same price). RBI has recently announced a non­competitive bidding facility for retail
investors in G­Secs through which non­competitive bids will be allowed up to 5 percent of the notified
amount in the specified auctions of dated securities.
18. Q. What are the types of trades in the Wholesale Debt Market?
A. There are normally two types of transactions, which are executed in the Wholesale Debt Market :
● An outright sale or purchase and
● A Repo trade
19. Q. What is a Repo trade and how is it different from a normal buy or sell transaction?
A. An outright Buy or sell transaction is a one where there is no intended reversal of the trade at the point of
execution of the trade. The Buy or sell transaction is an independent trade and is in no way connected with
any other trade at the same or a later point of time.
A Ready Forward Trade (which is normally referred to as a Repo trade or a Repurchase Agreement ) is a
transaction where the said trade is intended to be reversed at a later point of time at a rate which will
include the interest component for the period between the two opposite legs of the transactions.
So in such a transaction, one participant sells securities to other with an agreement to purchase them
back at a later date. The trade is called a Repo transaction from the point of view of the seller and it is called a
Reverse Repo transaction from point of view of the buyer.
Repos therefore facilitate creation of liquidity by permitting the seller to avail of a specific sum of money
(the value of the repo trade) for a certain period in lieu of payment of interest by way of the difference
between the two prices of the two trades.
Repos and reverse repos are commonly used in the money markets as instruments of short­term
liquidity management and can also be termed as a collateralised lending and borrowing mechanism.
Banks and Financial Institutions usually enter into reverse repo transactions to manage their reserve
requirements or to manage liquidity.
BOND ANALYTICS
20. Q. What is Yield?
A. Yield refers to the percentage rate of return paid on a stock in the form of dividends, or the effective rate of
interest paid on a bond or note. There are many different kinds of yields depending on the investment scenario
and the characteristics of the investment.
Yield To Maturity (YTM) is the most popular measure of yield in the Debt Markets and is the percentage
rate of return paid on a bond, note or other fixed income security if you buy and hold the security till its
maturity date.

12. Current Yield is the coupon divided by the Market Price and gives a fair approximation of the present yield.
Therefore, Current Yield = Coupon of the Security(in %) x Face Value of the Security (viz. 100 in case of G­
Secs.)/Market Price of the Security
Eg: Suppose the market price for a 10.18% G­Sec 2012 is Rs.120. The current yield on the security will be
(0.1018 x 100)/120 = 8.48%
The yield on the government securities is influenced by various factors such as level of money supply in
the economy, inflation, future interest rate expectations, borrowing program of the government & the
monetary policy followed by the government.
BOND ANALYTICS
21. Q. How is the Yield to Maturity computed?
A. The calculation for YTM is based on the coupon rate, length of time to maturity and market price. It is the
Internal Rate of Return on the bond and can be determined by equating the sum of the cash­flows
throughout the life of the bond to zero. A critical assumption underlying the YTM is that the coupon interest
paid over the life of the bond is assumed to be reinvested at the same rate.
The YTM is basically obtained through a trial and error method by determining the value of the entire range
of cash­flows for the possible range of YTMs so as to find the one rate at which the cash­flows sum up to
zero.
So, say, a G­Sec ­ 8.00% GOI Loan 2004 with only 2 cash flows remaining to maturity as under:
Maturity Date: 30th January 2004
Interest Payment Dates: 30th January, 30th July
and trading currently at Rs. 115 for 1 Unit, will have a YTM as follows:
Settlement Date: 17th March 2003 (Date at which ownership is transferred to the Buyer)
Frequency of Interest Payments: 2
Day Count Convention: 30/360 (which in MS­EXCEL is taken as Basis 4)
Yield To Maturity: 4.8626%
The same can be computed from MS­EXCEL through the YIELD Formula by input of the parameters given
above. It can be checked by discounting the said cash­flows, i.e., the two coupons of Rs. 8.00 each and
the principal repayment of Rs.100/­ from the interest payment dates and maturity dates to the date of
settlement.
22. Q. How is the price determined in the debt markets?

13. A. The price of a bond in the markets is determined by the forces of demand and supply, as is the case in any
market. The price of a bond in the marketplace also depends on a number of other factors and will
fluctuate according to changes in
● Economic conditions
● General money market conditions including the state of money supply in the economy
● Interest rates prevalent in the market and the rates of new issues
● Future Interest Rate Expectations
● Credit quality of the issuer
There is however, a theoretical underpinning to the determination of the price of the bond in the market
based on the measure of the yield of the security.
23. Q. How is Yield related to the price?
A. Yields and Bond Prices are inversely related. So a rise in price will decrease the yield and a fall in the bond
price will increase the yield.
There will be an immediate and mostly predictable effect on the prices of bonds with every change in the
level of interest rates.(The predictability here however refers to the direction of the price change rather than
the quantum of the change)
When the prevailing interest rates in the market rise, the prices of outstanding bonds will fall to equate the
yield of older bonds into line with higher­interest new issues. This will happen as there will be very few
takers for the lower coupon bonds resulting in a fall in their prices. The prices would fall to an extent
where the same yield is obtained on the older bonds as is available for the newer bonds.
When the prevailing interest rates in the market fall, there is an opposite effect. The prices of outstanding
bonds will rise, until the yield of older bonds is low enough to match the lower interest rate on the new
bond issues.
These fluctuations ensure that the value of a bond will never be the same throughout the life of the bond
and is likely to be higher or lower than its original face value depending on the market interest rate, the
time to maturity (or call as the case may be) and the coupon rate on the bond.
MARKET STRUCTURE AND TRADING METHODOLOGY IN WDS
24. Q. What is the concept of the broken period interest as regards the Debt Market?
A. The concept of the Broken period interest or the accrued interest arises as interest on bonds are received
after certain fixed intervals of time to the holder who enjoys the ownership of the security at that point of
time. Therefore an investor who has sold a bond which makes half­yearly interest payments three months
after the previous interest payment date would not receive the interest due to him for these three months
from the issuer. The interest on these previous three months would be received by the buyer who has held it
for only the next three months but receive interest for the entire six month periods as he happens to be
holding the security at the interest payment date.

14.
Therefore, in case of a transaction in bonds occurring between two interest payment dates, the buyer
would pay interest to the seller for the period from the last interest payment date up to the date of the
transaction. The interest thus calculated would include the previous date of interest payment but would
not include the trade date.
25. Q. What are the conventions followed for the calculation of Accrued Interest?
A .The Day Count Convention to be followed for the calculation of Accrued Intetest in case of transactions in
G­Secs is 30/360. I.e. each month is to be taken as having 30 days and each year is to be taken as having
360 days, irrespective of the actual number of days in the month. So, months like February, March,
January, May, July, August, October and December are to be taken as having 30 days.
26. Q. What is the Clean Price and the Dirty Price in reference to trading in G­Secs?
A. G­Secs are traded on a clean price (Trade price) but settled on the dirty price (Trade price + Accrued
Interest). This happens, as the coupon payments are not discounted in the price, as is the case in the
other non­govt. debt instruments.
27. Q. How are the Face Value, Trade Value and the settlement value different from each other?
A. The Cumulative face Value of the securities in a transaction is the face Value of the Transaction and is
normally the identifiable feature of each transaction.
Say, a transaction of Rs.5,00,000 worth of G­Secs will comprise a trade of 5000 G­Secs of Rs.100 each.
The Trade value is the cumulative price of the traded G­Secs (i.e. no. of securities multiplied by the price)
Say, the G­Secs referred to above may be traded at Rs.102 each so that the Trade Value is Rs.5,10,000
(102 x 5000).
The Settlement value will be the trade value plus the Accrued Interest.
The Accrued Interest per unit of the Bond is calculated as = Coupon of Bond x Face Value of the G­Sec.
(100) x (No. of Days from Interest Payment Date to Settlement Date)/360
In computing the no. of days between the Interest Payment Date and the Settlement Date of the trade, only
one of the two days is to be included.
28. Q. How can investors in India hold G­Secs?
A. G­Secs can be held in either of the following forms:
● Physical Security (which is mostly outdated & not used much)
● SGL (Subsidiary General Ledger) A/c with the Public Debt Office of the RBI. The SGL A/cs are
however restricted only to few entities like the Banks & Institutions.

15. ● Constituent SGL A/c with Banks or PDs who hold the G­secs on behalf of the investors in their SGL­II
A/cs of RBI, meant only for client holdings.
● Same Demat A/c as is used for equities at the Depositories. NSDL & CDSL will hold them in their
SGL­II A/cs of RBI, meant only for client holdings.
29. Q. What are the type of transactions which take place in the market?
A. The following two types of transactions take place in the Indian markets:
● Direct transactions between banks and other wholesale market participants which account for
around 25% of the Wholesale Market volumes: Here the Banks and the Institutions trade directly
between themselves either through the telephone or the NDS system of the RBI.
● Broker intermediated transactions, which account for around 70­75% of the trades in the market.
These brokers need to be members of a Recognized Stock Exchange for RBI to allow the Banks,
Primary Dealers and Institutions to undertake dealings through them
30. Q. What is the role of the Exchanges in the WDS?
A . BSE and other Exchanges offer order­driven screen based trading facilities for Govt. securities. The
trading activity on the systems is however restricted with most trades today being put through in the broker
offices and reported to the Exchange through their electronic systems which provide for reporting of
"Negotiated Deals" and "Cross Deals".
BSE WHOLESALE DEBT SEGMENT (WDS)
31. Q. When was the BSE accorded regulatory permission for the WDS?
A. Government securities market the largest and oldest component of Indian debt market was very active
segment on BSE since beginning of the 19th century. Government papers were traded actively at BSE
however wholesale debt market segment for government securities for institutional investors was further
introduced by BSE pursuant to following notifications issued by RBI.
DBOD. FSC. BC. No. 39 /24.76.002/2000 dated October 25, 2000
IDMC. PDRS. PDS. No PDS­2 /03.64.00/2000­01 dated November 13, 2000
DBS. FID No. C 10 / 01.08.00 / 2000­0122 dated November, 2000
The above notifications permitted Banks, Primary Dealers and Financial Institutions in India to undertake
transactions in debt instruments among themselves or with non­bank clients through the members of
BSE Limited. The Wholesale Debt Market Segment of BSE commenced its operations on June 15, 2001.

16.
32. Q. How is the settlement carried out in the Wholesale Debt Market?
A. The settlement for the various trades is finally carried out through the Clearing Corporation of India (CCIL).
As far as the Broker Intermediated transactions are concerned, the settlement responsibility for the trades
in the Wholesale market is primarily on the clients i.e. the market participants and the broker has no role to play
in the same. The member only has to report the settlement details to the Exchange for monitoring purposes. The
Exchange reports the trades to RBI regularly and monitors the settlement of these trades.
33. Q. What are the trading and reporting facilities offered by the BSE Wholesale Debt Segment?
A. The BSE Wholesale Debt Segment offers reporting facilities through the ICDM System, a browser based
system, which is an efficient and reliable reporting system for all the debt instruments of different types and
maturities including Central and State Govt. securities, T­Bills, Institutional bonds, PSU bonds, Commercial Paper,
Certificates of Deposit, Corporate debt instruments and the new innovative instruments like Repos.
34 Q. What are the varied deal reporting modules in the ICDM G­sec system?
A. The system permits reporting in the Wholesale Debt Market through the two following avenues:
● Negotiated Deal Module ­ which permits the reporting of trades undertaken by the market
participants through the members of the Exchange.
● Cross Deal Module ­ permitting reporting of trades undertaken by two different market participants
through a single member of the Exchange
35. Q. What is the membership criteria and charges for the membership of the BSE Wholesale Debt Segment?
A. The membership of the debt market segment is being granted to the Existing Members of the Exchange.
The members need to have a minimum net worth of Rs.30 lacs for admission to undertaking dealings on
the debt segment. No security deposit is applicable for the membership of the Debt Segment as in other
Exchanges. The annual approval/renewal charges of Rs.25,000/­ have been waived at present.
36. Q. What is the settlement mode allowed in GILT?
A. The settlements for all the trades executed on the system are on T+1 basis, as mandated by the Reserve
Bank of India.
37. Q. What are the aspects for settlement of trades in G­secs in GILT?
A. The Settlement for the securities traded in the Debt Segment would be on a Trade by Trade DVP basis.
The primary responsibility of settling trades concluded in the wholesale segment rests directly with the participants
who would settle the trades executed in the GILT system on their behalf through the Subsidiary Ledger Account of
the RBI. Each transaction is settled individually and netting of transaction is not allowed. The Exchange would

17. monitor the Clearing and Settlement process for all the trades executed or reported through the 'GILT' system. The
Members need to report the settlement details to the Exchange for all the trades undertaken by them on the GILT
system.
CORPORATE DEBT MARKET
38. Q. What is the structure of the Corporate Debt Market in India?
A .The Indian Primary market in Corporate Debt is basically a private placement market with most of the
corporate bond issues being privately placed among the wholesale investors i.e. the Banks, Financial
Institutions, Mutual Funds, Large Corporates & other large investors. The proportion of public issues in the
total quantum of debt capital issued annually has decreased in the last few years. Around 92% of the total
funds mobilized through corporate debt securities in the Financial Year 2002 was through the private
placement route.
The Secondary Market for Corporate Debt can be accessed through the electronic order­matching
platform offered by the Exchanges. BSE offers trading in Corporate Debt Securities through the automatic
BOLT system of the Exchange. The Debt Instruments issued by Development Financial Institutions, Public
Sector Units and the debentures and other debt securities issued by public limited companies are listed in
the 'F Group' at BSE.
39. Q. What are the various kinds of debt instruments available in the Corporate Debt Market?
A. The following are some of the different types of corporate debt securities issued:
● Non­Convertible Debentures
● Partly­Convertible Debentures/Fully­Convertible Debentures (convertible in to Equity Shares)
● Secured Premium Notes
● Debentures with Warrants
● Deep Discount Bond
● PSU Bonds/Tax­Free Bonds
40. Q. How is the trading, clearing and settlement in Corporate Debt carried out at BSE?
A. The trading in corporate debt securities in the F Group are traded on the BOLT order­matching system
based on price­time priority. The trades in the 'F Group' at BSE are to be settled on a rolling settlement basis
with a T+2 Cycle with effect from 1st April 2003. Trading continues from Monday to Friday during the week.
The Trade Guarantee Fund (TGF) of the Exchange covers all the trades in the 'F' Group undertaken on the
electronic BOLT system of the Exchange.
BSE RETAIL DEBT SEGMENT (REDS)
41. Q. What are the securities/instruments traded in the Retail Debt Segment (REDS) at the Exchange?

18. A. The Retail trading in Central Government Securities commenced on January 16, 2003 through the BOLT
System of the Exchange. Central Government Securities (G­Secs.) are currently listed at the Exchange under
the G Group. The Exchange may introduce, in due course of time, retail trading in other debt securities like
the following, subject to the receipt of regulatory approval for the same:
● State Government Securities
● Treasury Bills
● STRIPS
● Interest Rate Derivative products
42. Q. Who are the participants in the Retail Debt Market?
A. The following are the main investor segments who could participate in the Retail Debt Market:
● Mutual Funds
● Provident Funds
● Pension Funds
● Private Trusts.
● Religious Trusts and charitable organizations having large investible corpus
● State Level and District Level Co­operative Banks
● Housing Finance Companies
● NBFCs and RNBCs
● Corporate Treasuries
● Hindu­Undivided Families (HUFs)
● Individual Investors
43. Q. What is the membership criteria and procedure for the membership of the BSE Retail Debt Segment
(REDS)?
A. Eligibility Criteria for Members: The Members of the Segment possessing a net­worth of Rs. 1 crore and
above are eligible to trade in the Retail Debt segment. The members are required to submit additional
contribution of Rs. 5 lakhs as refundable contribution towards the separate Trade Guarantee Fund for this
Segment. This contribution of Rs.5 lakhs towards the Trade Guarantee Fund could be submitted in terms of
cash or FDR or Bank Guarantee. However, the Exchange has permitted the Members to earmark Rs.5 lakhs
from their additional capital for a period of one month or till such time separate contribution for TGF is
provided by them, whichever is earlier
44. Q. How are the Retail Transactions in G­Secs. executed at the Exchange?

19.
A. Eligibility Criteria for Members: The Members of the Segment possessing a net­worth of Rs. 1 crore and
above are eligible to trade in the Retail Debt segment. The members are required to submit additional
contribution of Rs. 5 lakhs as refundable contribution towards the separate Trade Guarantee Fund for this
Segment. This contribution of Rs.5 lakhs towards the Trade Guarantee Fund could be submitted in terms of
cash or FDR or Bank Guarantee. However, the Exchange has permitted the Members to earmark Rs.5 lakhs
from their additional capital for a period of one month or till such time separate contribution for TGF is
provided by them, whichever is earlier
45. Q. What is the listing procedure for G­Secs. in respect of the Retail Debt Market?
A.
● Eligible Securities: All outstanding and newly issued central government securities are eligible to be
traded on the automated, anonymous , order driven system of the eligible stock exchange. The
Rules, Bye­Laws and Regulations of the Exchange provide for trading in Government securities as
all G­secs are deemed to be admitted to dealings on the Exchange from the date on which they are
issued as per Bye­Law 22(a) and 22(b) of the Exchange.
● Group: The Government securities have been introduced as a new group of securities ­ "G" Group in
the BOLT system. The G­secs are allotted a 6­digit scrip code (in the 800000 series) and a 11
characters alpha­numeric scrip ID The interpretation for the Scrip IDs of G­Secs. in BOLT is as
under:
○ First 2 characters signify Central Government Security ­ CG
○ Next 4 Digits signify the coupon or interest rate of the G­Sec
○ Next 1 character is a differentiator which would be 'S' in case of a normal security and 'A'
incase there exists another security with the same coupon and maturity year
○ Next 2 Digits signify the Issue Year and the last 2 digits signify the Maturity Year
The date in the Scrip Name stands for the Maturity Date of the Security
The Exchange will implement and monitor the suspension of trading during the shutdown period so
that no settlements fall due in the no­delivery period which is on the T­3, T­2 and T­1 days for Government
Securities (where T is the interest payment date for the security).
Top
46. Q. What is the trading methodology in case of the Retail trading in G­Secs.?
A.
● Trading Methodology: The G­Secs shall be traded on the system and settled at the same price,
which will be inclusive of the accrued interest i.e. the Dirty Price as per the market parlance in the

20. Wholesale Debt Market. This is similar to the trading on the cum­interest price as is witnessed in the
case of corporate debentures. The minimum order size shall be 10 units of G­Secs with a face value
Rs.100/­ each equivalent to an order value of Rs. 1000/­ and the subsequent orders will be in lots of
10 securities each.
● Trading & Exposure Limits: The members of the Retail Debt Segment are permitted gross exposure
in government securities along their gross exposure in equity segment up to 15 times of their
additional capital deposited by them with the Exchange. However, no gross exposure is permitted to
the members against their Base Minimum Capital + contribution of Rs.10 lakhs towards TGF in the
cash segment. Transactions done by the members in this segment along with their transactions in
the equity segment would form part of their Intra­day Trading Limits and are subject to a limit of 33.33
times of the capital deposited with the Exchange. However, institutional business would not form part
of these Intra­Day & Gross Exposure limits.
Top
47. Q. How does the Clearing & Settlement of the Retail G­Sec. transactions take place in REDS?
A. The Clearing and Settlement mechanism for the Retail trading in G­Secs is based on the existing
institutional mechanism available at the Stock Exchanges for the Equity Markets. The trades executed
throughout the continuous trading sessions will be netted out at the end of the trading hours through a
process of multilateral netting. The transactions will be netted out member­wise and then scrip­wise so as to
determine the net settlement and payment obligations of the members.
The Delivery obligations and the payment orders in respect of these members are generated by the
Clearing and Settlement system of the Exchange. These statements indicate the pay­in and pay­out
positions of the members for securities and funds who would then give the necessary instructions to their
Clearing Banks and depositories.
Custodial confirmation of the retail trades in G­Secs. by using 6A­7A mechanism as available in the
Equity segment is also available. The schedule of various settlement related activities like obligation
download, custodial confirmation, pay­in/pay­out of funds and securities is similar to what is at present
applicable in the equities segment. As per an RBI Circular, the RBI regulated entities are to settle their
transactions in the Retail Debt Segment at the Exchange through a Custodian.
Top
48. Q. How are the security delivery shortages treated in the Retail Debt Segment?

21. A.In the event of failure/shortage in delivery of securities, the Exchange would close­out such shortages at the
ZCYC valuation for prices plus a 5% penalty factor which would be debited to the account of the member who has
failed to deliver the securities against his sale obligation. The buyer in the event of non­delivery of securities by the
seller would be eligible to receive the compensation/consideration which would be computed at the higher of
either the highest trade price from the trade date to the date of close out or closing price of the security in the
normal market on the close­out date plus interest calculated at the rate of overnight FIMMDA­NSE MIBOR for the
close­out date. The difference between the amount debited to the seller and amount payable to the buyer on the
basis discussed above would be credited to the Investor Protection Fund of the Exchange.
The Exchange has also set up a separate Trade Guarantee Fund (Settlement Guarantee Fund ) for the
Retail Trading in G­Secs. as was mandated by SEBI through its circular.
49. Q. How is the margining structure at the Exchange for the Retail Debt Market?
A.
● Margining ­ Mark to Market : The positions in the Retail Debt segment are marked to market until
settlement and mark to market margin on net outstanding position of the members is collected on all
open net positions. The mark to market margin is calculated based on the prices derived from the
Zero Coupon Yield Curve (ZCYC). This margin is to be collected on the T+1 day along with the
margin on the outstanding positions in cash segment.
● Margin exemption to Institutional business : Institutional business (i.e., business done by
members on behalf of Indian Financial Institutions, Foreign Institutional Investors, Scheduled
Commercial Banks, Mutual Funds registered with SEBI) would be exempted from margin, as is
applicable in the case of transactions in the equity segment, as the institutions are required under
the relevant regulations to transact only on the basis of giving and taking delivery. The members
would, however, be required to mark client type 'FI' at the time of order entry for availing of exemption
from payment of margins and also exclusion of such trades from Intra­day Trading and Gross
Exposure Limits. Custodial trades on behalf of Provident Funds transacting through a SGL­II account
(Constituent SGL a/c) would also be eligible for margin exemption.
● Margin Exemption against delivery : Margin exemption for early pay­in of securities in case of sale
transactions as applicable for the equities segment would also be available for this segment.
INVESTOR SAFEGUARDS

22. 50. Q. What are the main points to be kept in mind by the investor while investing in the Debt Markets?
A. The main features which you need to check for any debt security is:
● Coupon (or the discount implied by the price as in the case of zero coupon bonds) and the frequency
of interest payments. The securities can also be chosen in such a manner so that the interest
payments coincide with any requirements of funds at that point of time.
● Timing of Cash Flows ­ In case the interest and redemption proceeds, at one single point or at
different points of time, are planned to be used for meeting certain planned expenses in the
future.Information about the Issuer and the Credit Rating ­ It is essential to obtain enough
information about the background, the business operations, the financial position, the use of the
funds being collected and the future projections to satisfy oneself of the suitability of the investment.
As per the regulations in force in the capital markets, it is essential for any corporate debt security to
obtain a credit rating from any of the major credit rating agencies. A proper analysis of the
background and the financials of the issuer of any non­govt. debt instrument and especially the credit
rating would lend greater safety to your investments.
● Other Terms of particular Issue ­ It is also advisable to check on certain terms of the issue like the
use of the issue proceeds, the monitoring agency, the formation of trustees, the secured or
unsecured nature of the bonds, the assets underlying the security and the credit­worthiness of the
organization.
Most of the said information can be available from the prospectus of the said issue (In case of and any
required and relevant details can also be obtained on demand from the lead manager of the issue
● Obtain all the relevant knowledge on the debt security like the coupon, maturity, interest payments,
put and call options (if any), Yield To Maturity (at the particular price at which the trade is intended to
be carried out) and the Duration of the Instrument.
● Check the Yield To Maturity (YTM) of the debt security with the YTMs of other comparable debt
securities of the same class and features.
● Remember that the Yield and the Price are inversely related. So, you will be able to obtain a higher
yield at a lower price.

23. ● It is desirable to check on the liquidity of any corporate debt instrument before investing in it so as to
ensure the availability of satisfactory exit options.
● The Debt Markets are suited for investors who seek decent returns over a longer time horizon with
periodic cash flows. There is also a tax exemption for interest earned on G­Secs. up to Rs.3000/­
under Section 80L of the Income Tax Act.
The investor should be well aware of the set of risks associated with the Debt Markets like the default
risk (non­receipt or delay in receipt of interest or principal), price risk, interest rate risk (risk of rates moving
adversely after investment), settlement risk (or risk of non­delivery of securities and funds in the secondary
market) and the re­investment risk (interest payments fetching a lower return when re­ invested) .
Investors in the Debt Markets should follow a process of judicious investing after a careful study of the
economic and money market condition, various instruments available for investment, the desired returns
and its compatibility with existing investment opportunities, alternative modes available for investments
and the relevant transaction costs.
51. Q. What is the future scenario for the Retail Debt Market in India?
A. The Retail Debt Market is set to grow tremendously in India with the broadening of the market participation
and the availability of a wide range of debt securities for retail trading through the Exchanges.
The following are the trends, which will impact the Retail Debt Market in India in the near future:
● Expansion of the Retail Trading platform to enable trading in a wide range of government and
non­government debt securities
● Introduction of new instruments like STRIPS, G­Secs. with call and put options, securitised paper etc.
● Development of the secondary market in Corporate Debt
● Introduction of Interest Rate Derivatives based on a wide range of underlying in the Indian Debt and
Money Markets.
● Development of the Secondary Repo Markets.
The BSE vision for the Indian Debt Market foresees the markets growing in leaps and bounds in the
near future, soon attaining global standards of safety, efficiency and transparency. This will truly help the
Indian capital markets to attain a place of pride among the leading capital markets of the world.

24.
Types of Debt Instruments
A wide range of debt instruments are available to investors. In light of MiFID, Euronext has
adopted the Classification of Financial Instruments (CFI) code maintained by the International
Organization of Standardization (ISO).
Bonds
Any interest­bearing discounted security that normally obliges the issuer to pay the
bondholder a contracted sum of money, and to repay the principal amount of debt.
Convertible bonds
A bond that can be converted into other securities.
Bonds with warrants attached; A bond that is issued together with one or more warrant(s)
attached as part of the offer. The warrant(s) grant the holder the right to purchase a
designated security — often the common stock of the issuer of the debt, at a specified
price.
Medium­term notes
A negotiable debt instruments offered under a program agreement through one or more
dealers upon request of the issuer. The program defines the terms and conditions of the
notes.
Money market instruments
A debt securities that generally give the holder the unconditional right to receive a stated
fixed sum of money from the issuer on a specified date. Issuance tends to have a short
life, usually 12 months or less.

25. Others (miscellaneous); Debt instruments which do not fit into any of the above groups
such as asset­backed securities or mortgage­backed securities.
Types of Interest
Fixed rate
All interest payments are known at issuance and remain constant for the life of the issue.
Zero rate/discounted
No periodic interest payments are made; the interest charge (discount) is the difference
between maturity value and proceeds at time of acquisition.
Variable
The interest rate is subject to adjustment through the life of the issue.
Redemption/Reimbursement
The following indicate the retirement provisions made for debt issues:
Fixed maturity
The principal amount is repaid in full at maturity.
Fixed maturity with call feature
The issue may be called for redemption prior to the fixed maturity date.
Fixed maturity with put
The holder may request the reimbursement of his bonds prior to the maturity date.

26.
Model Deposit Policy
PREAMBLE
One of the important functions of the Bank is to accept deposits from the public for the purpose of lending. In fact,
depositors are the major stakeholders of the Banking System. The depositors and their interests form the key area
of the regulatory framework for banking in India and this has been enshrined in the Banking Regulation Act, 1949.
The Reserve Bank of India is empowered to issue directives / advices on interest rates on deposits and other
aspects regarding conduct of deposit accounts from time to time. With liberalization in the financial system and
deregulation of interest rates, banks are now free to formulate deposit products within the broad guidelines issued
by RBI .
This policy document on deposits outlines the guiding principles in respect of formulation of various deposit products
offered by the Bank and terms and conditions governing the conduct of the account. The document recognises the
rights of depositors and aims at dissemination of information with regard to various aspects of acceptance of
deposits from the members of the public, conduct and operations of various deposits accounts, payment of interest
on various deposit accounts, closure of deposit accounts, method of disposal of deposits of deceased depositors,
etc., for the benefit of customers. It is expected that this document will impart greater transparency in dealing with
the individual customers and create awareness among customers of their rights. The ultimate objective is that the
customer will get services they are rightfully entitled to receive without demand.
While adopting this policy, the bank reiterates its commitments to individual customers outlined in Bankers' Fair
Practice Code of Indian Banks' Association. This document is a broad framework under which the rights of common
depositors are recognized. Detailed operational instructions on various deposit schemes and related services will
be issued from time to time
Types of Deposit Accounts : ­
While various deposit products offered by the Bank are assigned different names. The deposit products can be
categorised broadly into the following types. Definition of major deposits schemes are as under : ­
i) "Demand deposits" means a deposit received by the Bank which is withdrawable on demand;
ii) "Savings deposits" means a form of demand deposit which is subject to restrictions as to the number of
withdrawals as also the amounts of withdrawals permitted by the Bank during any specified period;
iii) "Term deposit" means a deposit received by the Bank for a fixed period withdrawable only after the expiry of the
fixed period and include deposits such as Recurring / Double Benefit Deposits / Short Deposits / Fixed Deposits
/Monthly Income Certificate /Quarterly Income Certificate etc.
iv) Notice Deposit means term deposit for specific period but withdrawable on giving atleast one complete banking
day's notice;
v) "Current Account" means a form of demand deposit wherefrom withdrawals are allowed any number of times
depending upon the balance in the account or up to a particular agreed amount and will also include other deposit
accounts which are neither Savings Deposit nor Term Deposit;
Account Opening and Operation of Deposit Accounts
A) The Bank before opening any deposit account will carry out due diligence as required under "Know Your
Customer" (KYC) guidelines issued by RBI and or such other norms or procedures adopted by the Bank. If the
decision to open an account of a prospective depositor requires clearance at a higher level, reasons for any delay
in opening of the account will be informed to him and the final decision of the Bank will be conveyed at the earliest to
him.
B) The account opening forms and other material would be provided to the prospective depositor by the Bank. The
same will contain details of information to be furnished and documents to be produced for verification and or for
record, it is expected of the Bank official opening the account, to explain the procedural formalities and provide
necessary clarifications sought by the prospective depositor when he approaches for opening a deposit account.

27. C) For deposit products like Savings Bank Account and Current Deposit Account, the Bank will normally stipulate
certain minimum balances to be maintained as part of terms and conditions governing operation of such accounts.
Failure to maintain minimum balance in the account will attract levy of charges as specified by the Bank from time to
time. For Saving Bank Account the Bank may also place restrictions on number of transactions, cash withdrawals,
etc., for given period. Similarly, the Bank may specify charges for issue of cheques books, additional statement of
accounts, duplicate pass book, folio charges, etc. All such details, regarding terms and conditions for operation of
the accounts and schedule of charges for various services provided will be communicated to the prospective
depositor while opening the account.
D) Savings Bank Accounts can be opened for eligible person / persons and certain organizations / agencies (as
advised by Reserve Bank of India (RBI) from time to time)
Current Accounts can be opened by individuals / partnership firms / Private and Public Limited Companies / HUFs
Specified Associates / Societies / Trusts, etc.
Term Deposits Accounts can be opened by individuals / partnership firms / Private and Public Limited Companies
HUFs/ Specified Associates / Societies / Trusts, etc.
E) The due diligence process, while opening a deposit account will involve satisfying about the identity of the
person, verification of address, satisfying about his occupation and source of income. Obtaining introduction of the
prospective depositor from a person acceptable to the Bank and obtaining recent photograph of the person/s
opening / operating the account are part of due diligence process.
F) In addition to the due diligence requirements, under KYC norms the Bank is required by law to obtain Permanent
Account Number (PAN) or General Index Register (GIR) Number or alternatively declaration in Form No. 60 or 61 as
specified under the Income Tax Act / Rules.
G) Deposit accounts can be opened by an individual in his own name (status : known as account in single name) or
by more than one individual in their own names (status : known as Joint Account) . Savings Bank Account can also
be opened by a minor jointly with natural guardian or with mother as the guardian (Status : known as Minor's
Account). Minors above the age of 10 will also be allowed to open and operate saving bank account independently.
H) Operation of Joint Account ­ The Joint Account opened by more than one individual can be operated by single
individual or by more than one individual jointly. The mandate for operating the account can be modified with the
consent of all account holders. The Savings Bank Account opened by minor jointly with natural guardian / guardian
can be operated by natural guardian only.
I) The joint account holders can give any of the following mandates for the disposal of balance in the above
accounts :
i. Either or Survivor : If the account is held by two individuals say, A & B, the final balance alongwith interest, if
applicable, will be paid to survivor on death of anyone of the account holders.
ii. Anyone or Survivor/s : If the account is held by more than two individuals say, A, B and C, the final balance
alongwith interest, if applicable, will be paid to the survivor on death of any two account holders.
The above mandates will be applicable to or become operational only on or after the date of maturity of term
deposits. This mandate can be modified by the consent of all the account holders.
J) A the request of the depositor, the Bank will register mandate / power of attorney given by him authorizing
another person to operate the account on his behalf.
K) The term deposit account holders at the time of placing their deposits can give instructions with regard to closure
of deposit account or renewal of deposit for further period on the date of maturity. In absence of such mandate, the
Bank will seek instructions from the depositor/s as to the disposal of the deposit by sending an intimation before 15
days of the maturity date of term deposit.
L) Nomination facility is available on all deposit accounts opened by the individuals. Nomination is also available to a
sole proprietory concern account. Nomination can be made in favour of one individual only. Nomination so made can
be cancelled or changed by the account holder/s any time. While making nomination, cancellation or change thereof,
it is required to be witnessed by a third party. Nomination can be modified by the consent of account holder/s.
Nomination can be made in favour of a minor also.
Bank recommends that all depositors avail nomination facility. The nominee, in the event of death of the depositor/s,
would receive the balance outstanding in the account as a trustee of legal heirs. The depositor will be informed of
the advantages of the nomination facility while opening a deposit account.