Mumbai: Reserve Bank of India has allowed trading of state government securities in ‘separate trading of registered interest and principal of securities or STRIPS, a format that allows bond traders to strip principal and coupon payments and sell them separately. In a notification on Thursday, the RBI said decision is based on the consultation with the individual state governments and Union Territories and market feedback.
STRIPS trading has been permitted in eligible central government securities since April 2010. The RBI said that all fixed coupon bonds issued by the state government with residual maturity of up to 14 years and minimum outstanding of ₹1,000 crore are eligible for STRIPS. However, these securities must be eligible for meeting bank’s statutory liquidity ratio (SLR) requirements.
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