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Informist, Thursday, Dec. 26, 2024

 

MUMBAI – India's seven standalone primary dealerships reported a profit after tax of INR 16.63 billion in 2023-24 (Apr-Mar), up nearly five times from a year ago, the Reserve Bank of India's Report on Trend and Progress of Banking in India 2023-24 said on Thursday. All the 21 primary dealerships, including banks' departments acting as primary dealers, were able to meet their required bidding commitments at auctions, the report said. 

 

The RBI said the improved profitability of standalone primary dealers was due to the higher interest and discount income, which was at INR 91.58 billion in 2023-24, up from INR 58.16 billion in the previous year. The trading profits zoomed to INR 10.60 billion, against a loss of INR 4.95 billion the previous year. The higher income aided the segment in absorbing the increased expenses comfortably. The total expenses of the stand-alone dealerships were INR 84.22 billion, up from INR 50.74 billion in the previous year. Only one of the seven standalone primary dealers, PNB Gilts, is listed on stock exchanges.

 

In the government securities market, the 21 primary dealerships picked up 63.5% of the total quantum of issuances in FY24, up from 56.6% the year earlier. In the first half of the current financial year, the share increased to 67.0%, the RBI report showed.

 

The underwriting commission received by primary dealerships more than halved to INR 411 million in FY24, from INR 911 million the previous year. The government's borrowing programme in FY24 went through without any amount being devolved on primary dealers, for the first time in over a decade. The underwriting commission is set to be even lower in the current financial year at INR 83.4 million in Apr-Sept.

 

The decline in the average rate of underwriting commission also reflected the strength in demand for government bonds. For every INR 100 underwritten, primary dealers were only paid 0.11 paisa on average in Apr-Sept, down from 0.27 paisa in FY24 and 3.89 paise in FY22.

 

The subscription of primary dealerships to T-bills was at 69.6% of the total quantum in FY24, against 68.9% last year. The subscription percentage was at 76.4% for the T-bills issued in the first half of the current financial year that ended on Sept. 30, the report said.

 

All the primary dealers have individually achieved the minimum stipulated annual turnover ratio, the RBI said. The targets for 2023-24 were fixed at 1.5% of the average of the previous three years' outright market turnover in government securities and Treasury bills on an aggregate basis, up from 1.0% fixed for the previous year. For the financial year 2024-25, the target has been increased to 2.0%, the RBI paper said.

 

Meanwhile, an increase in the risk-weighted assets led the combined capital-to-risk weighted asset ratio for the standalone primary dealers to fall to 42.2% in FY24 from 50% in the previous year. However, it remained well above the regulatory norm of 15%, the report said.  End

 

Reported by Vidhushi RajPurohit

Edited by Saji George Titus

 

 

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