More Transparency In Gilts Trade Seen Ahead

Trading in the government securities market is set to become increasingly transparent over the years with the availability of information becoming easier, R H Patil, chairman, Clearing Corporation of India, said.

Speaking at a seminar on 'trading and settlement of debt instruments post-negotiated dealing system and Clearing Corporation of India', Patil said, as the speed of information is to increase sharply and will ultimately available on real time basis, it will reduce transaction costs as well.

Usha Thorat, chief general manager, Internal Debt Management Cell, Reserve Bank of India, pointed out that real time gross settlement system will be established in another 12-18 months time.

Patil, however, feels that over the next couple of years, the government security market will be dominated by the institutional players. He added that banks can play a role in bringing in retail investors in the market.

He said: "Banks are flooded with deposit money, but they cannot afford to discourage their valued customer from depositing more money. In such a situation, banks can encourage their clients to buy government securities lying idle with them." He pointed out that banks at present hold SLR securities well in excess of their requirement.

Patil also said the volume of corporate debt market is not likely to increase much in the recent future, and hence the debt market will largely be dominated by government securities. He, however, said there can be change in the maturity structure of the traded securities.

He pointed out that CCIL is planning to introduce a new repo variant -- collateralised borrowing and lending product (CBLP). The Corporation will play a third party role in these repo transactions.