RBI Allows STRIPS in State Govt. Securities With 14-Year Maturity

  • Blog|News|FEMA & Banking|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 16 June, 2025

Latest from Taxmann

RBI STRIPS State Government Securities

Circular No. RBI/2025-26/54 IDMD.RD.S390/10.18.060/2025-26; Dated: 12.06.2025

The Reserve Bank of India (RBI) has officially permitted the use of ‘Separate Trading of Registered Interest and Principal of Securities’ (STRIPS) in State Government Securities (SGS). This strategic development aligns with RBI’s ongoing efforts to deepen the bond market and enhance liquidity in government securities.

1. What Are STRIPS?

STRIPS refer to a mechanism whereby the interest (coupon) and principal components of a security are separated and traded individually as zero-coupon instruments. This allows investors to trade specific cash flows of a bond, offering more flexibility in managing interest rate risks and portfolio strategies.

Until now, STRIPS were limited primarily to Central Government securities. With this move, RBI has extended the facility to SGS as well.

2. Consultative Approach and Stakeholder Feedback

The decision to extend STRIPS to SGS comes after extensive consultations with State Governments and Union Territories, along with feedback from market participants. The move is expected to provide a wider range of tradable instruments in the State Government debt market and support long-term investment strategies.

3. Eligibility Criteria for Stripping SGS

The RBI has laid down specific conditions for State Government Securities to qualify for STRIPS. These include:

  • The security must carry a fixed coupon.
  • It must have a residual maturity of up to 14 years.
  • The minimum outstanding amount must be ₹1,000 crore as of the date of stripping.

These conditions ensure that only liquid and sizable securities are eligible, preserving market efficiency and investor interest.

4. Significance of the Move

This reform is expected to:

  • Enhance liquidity in State Government Securities.
  • Provide more investment options for risk-averse and long-term investors.
  • Facilitate better price discovery and yield curve development in the state debt segment.
  • Help state governments manage their borrowing programs more flexibly.

5. Conclusion

RBI’s inclusion of STRIPS for State Government Securities marks a progressive step in the evolution of India’s government securities market. By offering greater trading flexibility and aligning state debt instruments with global best practices, this move is likely to benefit institutional investors and strengthen India’s fixed-income ecosystem.

Click Here To Read The Full Circular

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied