There is a positive development for holders of Government of India bonds who are using the demat account of Stock Holding Corporation of India Limited (SHCIL). Since 13th April, their ‘system’ has started accepting applications for nomination in the case of joint-holders of GoI Bonds.
This is a first-hand account and I want to share it with readers of Moneylife. More so since it is really a case of Moneylife impact!
For several years, I have been putting a small part of my savings into GoI bonds subscribed through SHCIL. All the holdings are in joint names. While making the application, I was informed that for joint holdings, there is no provision for nomination. The usual pitch was that it was not necessary because the holdings were in joint names. And, while I did not accept the logic, I had not really gotten down to insisting on my right to nominate, for a relatively easier way of transmission of the holdings.
More recently, I was helping my niece and nephew with regard to transmission of inherited assets through a Will. It took enormous amount of energy, paperwork and expenses. Also disturbed by deaths of couples due to COVID, I decided to revisit all my nominations. I found that my jointly-held SHCIL bonds lacked a nominee.
So, the first step was to contact the agent, through whom I had bought the bonds. He gave me the usual spiel that it was not necessary... etc, etc. On my insistence, he agreed to send my applications to SCHIL and promptly sent me their acknowledgement receipt. I waited for a fortnight before reminding the agent, who went to SCHIL office personally to follow it up. Since I happen to know the branch manager, he called me personally to explain that there was a problem with my request and he had tried to ‘enter the details in the system twice and the applications had been rejected’. I told him that I wanted this in writing, so that I could escalate the matter. So he realised I wasn’t going to be placated.
In the meanwhile, being a part of the Moneylife family, I was able to access the fact that the regulations for The Government Securities Act, 2006 and The Government Securities Regulations, 2007 came into effect on 1 December 2007 clearly state that the nomination facility is available for joint holdings also. These are now available on the website of the Reserve Bank of India (RBI) and my colleagues promptly sent me the pdf of the FAQ (frequently asked questions) from RBI’s website.
I forwarded the pdf to branch manager SCHIL who, in turn, forwarded it to their head-office. Two days later, he was asked by his head-office to enter the details of my applications ‘in the system’. And, lo and behold! This time the system accepted them and the nomination has been affected. On 13th April, I received SCHIL’s system-generated communication giving me the details of the registration date and number of the nominee.
Why their ‘system’ should have taken 13 years (since the Regulations became effective in 2007) is another matter. As they say in this part of the world -- der aaye, durust aaye.
For our readers who may be interested, here are excerpts from the RBI document.
Government securities offer the benefit of safety, liquidity and attractive returns to investors. With the enactment of the Government Securities Act, 2006 Government securities, including the Relief/Savings Bonds issued by the Government of India, have become more investor friendly. Investors of such bonds will particularly benefit from such changes in the Act. To create public awareness in this regard and as a customer friendly measure, the following Frequently Asked Questions (FAQs) along with the answers have been released by the Reserve Bank of India (RBI)
1. What does one mean by Government security?
Government security (G-Sec) means a security created and issued by the Government for the purpose of raising a public loan or any other purpose as notified by the Government in the Official Gazette and having one of the following forms.
i. a Government Promissory Note (GPN) payable to or to the order of a certain person; or
ii. a bearer bond payable to a bearer; or
iii. a stock; or
iv. a bond held in a Bond Ledger Account (BLA).
17. Whether the G S Act provides for nomination facility?
Yes. The G S Act provides for nomination facility for a Government security other than in the form of GPN and bearer bond. The sole holder or all the joint holders of such a Government security may nominate one or more persons, who in the event of death of the sole holder or the death of all the joint holders, would become entitled to the Government security and payment thereon.”
The G S Act and the G S Regulations came into force with effect from December 1, 2007. The G S Act applies to Government securities created and issued by the Central Government or a State Government, whether before or after the commencement of this Act. The G S Act will apply to all Government securities created and issued even prior to December 1, 2007.