"We have submitted a paper in this regard to the Securities and Exchange Board of India (Sebi). Introduction of this measure will speed up the process of settlement, allowing delivery versus payment (DVP) and enhance liquidity," NSDL managing director CB Bhave said at a corporate debt seminar organised by the Fixed Income Money Market and Derivatives Association of India (Fimmda) on Friday.

"The securities so held by the DP banks could be re-covernted back into rupee demat balances at the end of the day," he added.

DPs act as clearing banks for facilitating payment for security transactions, with the securities clearing being performed by the depository. "Allowing conversion of current balances will allow book entries for transfer of funds and securities to be simultaneous removing the present time lag in the settlement process," Bhave said.

Speaking at the seminar, RBI executive director PR Gopala Rao said the central bank will shortly introduce its final guidelines for investment in non-SLR securities by banks. The apex bank, in its draft guidelines released in April this year recommended that investment in non-SLR securities should be capped at 15 per cent of the total investment portfolio. It suggested that investment in individual issues be capped at 10 per cent, beyond which it will be treated as an advance. The draft guidelines treat debentures with maturity of over five years and above on par with advances.

"The RBI is also working on introducing electronic trading in government securities," Rao added. According to Discount and Finance House of India (DFHI) managing director MR Ramesh, a core group comprising members drawn from banks, financial institutions, Fimmda and the Foreign Exchange Dealers Association of India (Fedai) has been set up for preparing the terms of reference for setting up a clearing corporation for debt instruments and repos.

"The core group will submit its report to RBI soon. Once the clearing corporation is established, settlement of trades will be quicker," he added.