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Informist, Friday, Nov. 29, 2024

 

--Dealers: Banks made half-yearly premium payments to DICGC on Fri

--Dealers: DICGC expected to soon pick up gilts in auctions, secondary mkt

 

By Aaryan Khanna

 

NEW DELHI - Indian banks made their half-yearly premium payments to the Deposit Insurance and Credit Guarantee Corp. on Friday, according to treasury officials at four banks. This is expected to spur bond purchases from the insurer at the government's weekly auctions either this week or the next and in the secondary market.

 

"The premium payments have been debited today (Friday)," a senior treasury official at a private bank said. "They (the deposit insurer) may be present at today's (Friday) gilt auction as well and sometimes come into the secondary market to pick up liquid securities."

 

The Deposit Insurance and Credit Guarantee Corp. is an arm of the Reserve Bank of India and fully insures bank deposits of up to INR 500,000. The current premium rate is 10 paise per INR 100 of deposits per year, or 0.10%. As such, the half-year premium is 5 paise per INR 100 of deposits, or 0.05%. The premium for the first half of the financial year is to be paid by the last working day of November. According to market estimates, the total premium collected by the deposit insurer in the current tranche is likely to be about INR 100 billion-INR 120 billion.

 

After banks pay their premium, the insurer deploys the funds in liquid securities maturing up to 15 years, officials said. The deposit insurer typically invests the premiums within a few days of collection, they added.

 

"Some state-owned banks usually make the payment before us, so some part of the buying could have come in already, including at the auction (at 1030-1130 IST on Friday)," a treasury official at another private bank said.

 

A senior treasury official at a big state-owned bank said it had made the premium payments only on Friday. Dealers said the expected purchases from the deposit insurer will likely buoy gilt prices over the next week.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Deepshikha Bhardwaj and Vandana Hingorani

 

 

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