Physical Verification of Securities Certificate – CA Guide 2026

It is an assurance certificate issued by a bank's concurrent auditor confirming that the investments and securities shown in the bank's books and reported to the Reserve Bank of India as on a given reporting date are actually owned and held by the bank. Existence and ownership are evidenced either by physical security scrips held in joint custody or by the outstanding statement of the bank's SGL, CSGL/Gilt or demat holdings.

It is purely an institutional, internal-control certificate within a bank's treasury function. It is not a personal certificate and has nothing to do with individuals, home loans, visa applications, education loans or NRI documentation. Anyone arriving here looking for a personal net worth or solvency certificate needs a different document.

It is normally issued by the concurrent auditor of the treasury department — typically an independent practising Chartered Accountant or CA firm empanelled by the bank. The basic physical count of any scrips may be carried out by bank officials who are unconnected with their custody, but the independent certification to the Board and RBI is generally signed by the CA concurrent auditor.

It confirms that securities reported to RBI and counted towards Statutory Liquidity Ratio (SLR) genuinely exist, are owned by the bank, and are not double-counted, fictitious or already pledged. These controls were tightened after the 1992 securities scam, where misuse of Bank Receipts allowed banks to show securities they did not actually hold.

Today almost all government securities are held electronically in SGL, CSGL/Gilt or demat accounts, so “verification” mainly means independently obtaining the holding statement from RBI, the custodian or the depository and reconciling it with the bank's books. Where any securities are still held as physical scrips, the auditor additionally inspects and counts them under joint custody.

It is the statement of securities held in the bank's name issued by the holding entity — the SGL statement from RBI's Public Debt Office / e-Kuber, the CSGL or Gilt account statement from the custodian, or the demat holding statement from NSDL/CDSL. It is the primary independent evidence of ownership when securities are not in physical form.

An SGL (Subsidiary General Ledger) account is held directly with RBI to keep government securities in electronic form. A CSGL (Constituent SGL) or Gilt account is held with a custodian (a scheduled commercial bank, Primary Dealer, financial institution or SHCIL) on behalf of constituents who do not have a direct SGL account. Most small banks hold their G-secs in a CSGL/Gilt or demat account.

It is prepared as on the reporting date for which holdings are reported to RBI — typically the last reporting Friday of each quarter. The certificate confirms the position strictly as on that date.

For Urban Co-operative Banks, the quarterly certificate must be submitted to the Regional Office of RBI's Urban Banks Department having jurisdiction over the bank within 30 days from the end of the relevant quarter. Any delay is required to be reported.

It is usually addressed to the Board of Directors or the Chairman of the bank, and for Urban Co-operative Banks a copy is forwarded to the Regional Office of RBI's Urban Banks Department. It also forms part of the concurrent audit report placed before the Audit Committee.

RBI's revised guidelines on the Concurrent Audit System (circular dated 16 July 2015) make treasury operations and physical verification of securities minimum areas of coverage. The detailed scope is decided by the bank's head of internal audit with the approval of the Audit Committee.

For Urban Co-operative Banks, the current framework is the RBI (Urban Co-operative Banks – Classification, Valuation and Operation of Investment Portfolio) Directions, 2025; commercial banks follow the parallel Directions of 2023. These require G-secs to be held in SGL, CSGL/Gilt or demat form, and any physical securities to be kept under joint custody and verified quarterly by persons unconnected with their custody.

No. RBI Directions prohibit a bank from issuing or accepting Bank Receipts or similar instruments for transactions in government securities. An outstanding BR is a serious exception that the auditor must report.

RBI requires that verification of any physically held securities be carried out by persons unconnected with their custody, to preserve independence. In practice the concurrent auditor (a CA) performs and certifies this verification.

Banks ordinarily appoint practising Chartered Accountants or CA firms as concurrent auditors, and the independent certification is signed by the CA with a UDIN. While a bank's own officer unconnected with custody can perform routine internal verification, the assurance certificate relied upon by the Board and RBI is a CA's professional certificate.

Concurrent audit and assurance certification of a bank's treasury is, in practice, the domain of Chartered Accountants under ICAI's auditing and assurance framework. Cost Accountants and Company Secretaries are not ordinarily appointed to certify physical verification of a bank's securities for RBI purposes.

Key records include the scrip-wise investment register, the SGL/CSGL/demat holding statements, the reporting-Friday holdings report, the SLR and investment returns filed with RBI, deal slips and broker notes, counterparty confirmations, the joint-custody register for any physical scrips, repo/TREPS/LAF and pledge records to identify encumbered securities, and the Board-approved Investment Policy.

By obtaining the SGL holding statement directly from RBI's Public Debt Office or e-Kuber system and reconciling it with the bank's books and the return submitted to RBI, rather than relying only on internally generated reports.

By obtaining the demat holding statement from the depository (NSDL or CDSL) or the depository participant and matching it scrip-by-scrip with the investment register and the RBI return.

Securities that are pledged, lent, or sold under repo / TREPS / LAF are encumbered and should not be counted as freely available or as eligible SLR holdings. The auditor identifies them using CCIL/TREPS reports and repo registers and discloses them separately in the certificate.

Banks maintain Statutory Liquidity Ratio under Section 24 of the Banking Regulation Act, 1949 by holding approved securities. The certificate supports SLR compliance by confirming that the securities reported as SLR holdings actually exist, are owned by the bank, and are unencumbered.

No. This certificate is about existence, ownership and custody of securities. Valuation, classification (HTM/AFS/FVTPL) and provisioning are addressed through separate exercises such as the periodic portfolio valuation and the half-yearly investment review, although the same concurrent auditor often examines those too.

The physical verification certificate confirms that reported securities are owned and held as on the reporting date. The half-yearly portfolio review (as on 31 March and 30 September) is a wider review of the composition, valuation and performance of the portfolio placed before the Board and forwarded to RBI.

Concurrent audit is continuous, transaction-level checking close to the event, and produces frequent certificates such as this one. The statutory audit is the annual audit of financial statements, supported by the Long Form Audit Report (LFAR), which covers treasury and investments once a year for the whole bank.

Yes. ICAI requires a Unique Document Identification Number (UDIN) on certificates issued by Chartered Accountants, including bank certificates. A certificate without a UDIN can be treated as invalid and cannot be verified on the ICAI portal.

It is a point-in-time certificate valid as on the reporting date it covers (usually the last reporting Friday of the quarter). It does not certify holdings before or after that date; a fresh certificate is issued for each reporting period.

Yes. If the auditor finds unreconciled differences, missing scrips, encumbered securities wrongly treated as free, outstanding Bank Receipts, or inadequate records, the certificate is qualified with specific exceptions or, in serious cases, the auditor declines to certify.

Differences between book holdings and the SGL/CSGL/demat statement, securities reported to RBI but not actually held, double-counting, pledged or repo securities shown as free SLR holdings, outstanding BRs, physical scrips not under joint custody, and securities of doubtful title.

The auditor reports the difference, the bank must investigate and reconcile it, and the certificate is qualified until the difference is resolved. Unreconciled differences in securities are a significant control failure and may need to be reported to the Board and RBI.

The Directions require submission within 30 days of quarter-end, and any delay is to be reported. Persistent delays attract supervisory comment and can be viewed as a compliance lapse during RBI inspection.

Yes, in substance. All banks subject the treasury to concurrent audit and must hold and verify securities under RBI's investment directions. The specific quarterly certificate to the Urban Banks Department is a feature of Urban Co-operative Banks, but commercial banks carry out equivalent verification and reporting internally and through statutory audit.

NBFCs hold liquid assets and securities under Section 45-IB of the RBI Act, 1934 in SGL, CSGL or demat form, and are subject to their own custody and audit requirements. This particular UCB certificate is bank-specific, but the underlying principle — independent verification of owned securities — applies broadly.

Yes. Independence is essential. The verifier must be unconnected with the custody and operation of the securities, and the CA concurrent auditor is bound by ICAI's independence and ethics requirements.

It is a special-purpose assurance engagement governed by ICAI's Guidance Note on Reports or Certificates for Special Purposes and the Standard on Assurance Engagements (SAE) 3000, together with ICAI's Guidance Note on Audit of Banks.

Any physical securities must be held under the joint custody of two designated officials so that no single person can remove or substitute them. The auditor checks the joint-custody register and verifies that the scrips physically agree with it.

They were strengthened after the 1992 securities scam, in which the misuse of Bank Receipts and weak custody let banks record securities that were not genuinely held. Mandatory electronic holding (SGL/CSGL/demat), the ban on BRs, joint custody and independent verification all flow from that experience.

Internal officers unconnected with custody may perform routine internal verification, but the independent assurance certificate placed before the Board and submitted to RBI is normally a Chartered Accountant's certificate carrying a UDIN.

Concurrent audit is continuous, with reports usually submitted monthly to management and the Audit Committee. The physical verification certificate is generated for each quarterly reporting date, in addition to the half-yearly portfolio review.

It is part of the concurrent audit engagement fee, negotiated between the bank and the CA firm based on the size and complexity of the treasury, transaction volumes and the scope agreed. There is no fixed statutory fee.

No. It provides reasonable assurance, as on the reporting date, based on the records and statements examined and independent confirmations obtained. It is not an absolute guarantee, and the auditor clearly states the basis and limitations of the certification.

A bank that misreports securities faces RBI penal and supervisory action under the Banking Regulation Act, 1949 and fraud-reporting requirements. A Chartered Accountant who certifies falsely faces ICAI disciplinary action under the Chartered Accountants Act, 1949, and possible criminal and civil liability.

It is the continuous, near-real-time examination of a bank's treasury and investment transactions — deals, settlements, custody and reporting — to catch errors and irregularities quickly, as required by RBI's concurrent audit guidelines.

A Subsidiary General Ledger account is an electronic account maintained with RBI in which a bank holds its government securities, removing the need for physical certificates.

A Constituent Subsidiary General Ledger account is opened by a custodian with RBI to hold government securities on behalf of constituents who do not have their own SGL account.

A Gilt account is the account a constituent holds with a CSGL custodian to keep its government securities electronically, with servicing handled by the custodian.

A Bank Receipt (BR) was a paper acknowledgement once used in place of delivering actual securities. Its misuse caused major frauds, and RBI now prohibits issuing or accepting BRs for G-sec transactions.

Because BRs allowed banks to record securities that were never actually delivered, enabling fictitious holdings. Mandatory SGL/CSGL/demat settlement replaced them to ensure securities genuinely change hands.

It is the reference date RBI uses for periodic reporting of a bank's position; quarter-end holdings are typically reported and certified as on the last reporting Friday of the quarter.

Statutory Liquidity Ratio is the minimum percentage of a bank's liabilities that must be held in approved liquid assets, mainly government securities, under Section 24 of the Banking Regulation Act, 1949.

RBI's Department of Supervision, through the Urban Banks Department and its Regional Offices, supervises Urban Co-operative Banks and receives their periodic certificates and returns.

e-Kuber is RBI's core banking system used for, among other things, government securities and SGL account operations, from which holding statements can be obtained.

These are investment categories: Held to Maturity, Available for Sale, and Fair Value Through Profit and Loss. They determine how securities are valued and how gains or losses are recognised.

The Fixed Income Money Market and Derivatives Association of India sets market conventions and valuation guidance for fixed-income securities used by banks.

The Clearing Corporation of India Ltd (CCIL) clears and settles G-sec and money-market trades; TREPS (Triparty Repo) is a collateralised borrowing and lending mechanism that encumbers the securities involved.

They are RBI's consolidated rules on how Urban Co-operative Banks classify, value, hold and operate their investment portfolio, including custody in SGL/CSGL/demat form and verification of any physical securities.

The bank's management appoints concurrent auditors with the approval of the Audit Committee or Board, and the scope is decided by the head of internal audit.

The Long Form Audit Report is a detailed questionnaire-based report by statutory auditors covering areas including investments and treasury, submitted annually.

The Audit Committee approves the scope, reviews concurrent audit findings, monitors corrective action and assesses the effectiveness of the system at least once a year.

Through SGL accounts with RBI, CSGL/Gilt accounts with custodians, or demat accounts with NSDL/CDSL, with all transactions settled in these accounts.

It is an entity (such as a bank, PD, financial institution or SHCIL) permitted by RBI to maintain a CSGL account and hold securities on behalf of its constituents.

Holding is overwhelmingly electronic, but if any securities remain in physical form they must be recorded, kept under joint custody and verified quarterly by persons unconnected with custody.

It means physical scrips and related instruments are kept in the joint control of two designated officials so that no single person can access or remove them alone.

Statutory audit is the annual audit of financial statements; concurrent audit is continuous transaction-level checking carried out throughout the year.

Banks review the investment portfolio half-yearly, as on 31 March and 30 September, and place the review before the Board for onward submission to RBI.

Section 35 empowers RBI to inspect a bank and its books, which underpins RBI's right to verify securities holdings and supervisory certificates.

It governs the issue, holding and transfer of government securities, including SGL and CSGL accounts and the legal title to such securities.

It is matching the bank's investment ledger with the SGL/CSGL/demat statements and RBI returns to ensure every reported security is actually held and correctly recorded.

It is selling a security the seller does not own, allowed only within RBI's limits and controls; auditors check that any short positions are within delegated powers and covered as required.

They are depositories where banks can hold securities in dematerialised form, providing holding statements used as independent evidence of ownership.

It means the securities exist, the bank has valid title to them, they are in the bank's custody or its SGL/CSGL/demat account, and they are not fictitious, double-counted or already transferred away.

A Unique Document Identification Number is generated by the CA on the ICAI portal for each certificate, letting banks and RBI verify the certificate's authenticity and the issuing CA's identity.