 "RBI looking for retail participation in G-sec market")
The Reserve Bank of India (RBI) is looking for retail participation in the government bond market. Just a day after reducing the statutory liquidity ratio (SLR) requirement by 50 basis points, RBI Governor Raghuram Rajan said he believed every new buyer of bonds need not be a foreign investor.
“We have other sources of buying for government bonds and, as the Indian markets develop, more domestic institutional investors, pension funds and insurance companies will start looking at deploying more of their funds in the Indian bond market. We have to facilitate the way for Indian retail investors to get in,” Rajan said during a post-monetary policy conference call with analysts and researchers.
He added it wasn’t necessarily true that with a cut in the SLR limit, banks would no longer be clients for government bonds.
Rajan said he was open to enhancing the limits for foreign investors, but this had to be done gradually. “At this point, we are fairly comfortable with the fact that there is room in the G-Sec market for more investments for foreign investors. We are also comfortable with the maturity at which they are coming in. Essentially, the three-year-plus range…is a pretty decent level for us to be at,” he said.
RBI is also in talks with the government on cash balances. “As of now, they have some reservations about releasing the figures. That is the constraint. But we are in discussions with the government on auctioning their balances. If and when that happens, it will give an indication of how much balance they have,” said RBI Deputy Governor H R Khan. The central bank is seeking information pertaining to the matter on a real-time basis so that it can determine fluctuations, as this will lead to better liquidity management.
Rajan said soon, the central bank would come out with the necessary measures required to arrest volatility in call money rates.
“We have other sources of buying for government bonds and, as the Indian markets develop, more domestic institutional investors, pension funds and insurance companies will start looking at deploying more of their funds in the Indian bond market. We have to facilitate the way for Indian retail investors to get in,” Rajan said during a post-monetary policy conference call with analysts and researchers.
He added it wasn’t necessarily true that with a cut in the SLR limit, banks would no longer be clients for government bonds.
More From This Section
Besides cutting the SLR requirement to 22 per cent of banks’ net demand and time liabilities (NDTL), effective the fortnight beginning Saturday, RBI also reduced the total holdings of SLR securities in the held-to-maturity category 50 basis points to 24 per cent of NDTL. These steps dampened the sentiment in the bond market, as there was concern banks might sell their illiquid bonds.
Rajan said he was open to enhancing the limits for foreign investors, but this had to be done gradually. “At this point, we are fairly comfortable with the fact that there is room in the G-Sec market for more investments for foreign investors. We are also comfortable with the maturity at which they are coming in. Essentially, the three-year-plus range…is a pretty decent level for us to be at,” he said.
RBI is also in talks with the government on cash balances. “As of now, they have some reservations about releasing the figures. That is the constraint. But we are in discussions with the government on auctioning their balances. If and when that happens, it will give an indication of how much balance they have,” said RBI Deputy Governor H R Khan. The central bank is seeking information pertaining to the matter on a real-time basis so that it can determine fluctuations, as this will lead to better liquidity management.
Rajan said soon, the central bank would come out with the necessary measures required to arrest volatility in call money rates.