Icici Pact Curbs Brokers Over Safety Bonds Sop

In a bid to end the cut-throat competition between brokers in the marketing of its bonds, Industrial Credit and Investment Corporation of India (ICICI) has asked the brokers appointed for Safety Bonds to sign a memorandum of understanding (MoU) which would prevent them from passing the brokerage fee beyond 75 basis points to their sub-brokers.

As many as 100 brokers appointed by ICICI have signed the MoU.

According to Madhabi Puri Buch, deputy general manager, ICICI, "We have decided to come down heavily on brokers who violate the MoU because such practices lead to rate wars."

ICICI is offering 1.25 per cent as brokerage fees and Rs 25 for getting an application form.

 

This is the second MoU ICICI has signed for controlling such practices. The first MoU was signed between 14 lead managers which stated that the lead management fee could not be passed to the customers.

"ICICI has taken severe action last time when two sub-brokers had violated the MoU, and it resulted in dismissing the sub-broker code for both the parties," said Buch.

The forthcoming bond issue of ICICI, aimed to raise Rs 300 crore with a greenshoe option of Rs 300 crore, is slated to open on August 27. The issue has four instruments - regular return, money multiplier, tax saving and encash bonds.

"We think the encash bonds will provide sufficient liquidity to investors as it has an exit option after a lock-in period of one year. Investors can encash their investments from any of the ICICI Bank branch or ICICI office," Buch said. "We expect to collect Rs 100 crore from this instrument," she added.

This is the third tranche of the ICICI Safety Bond issue. While the first issue mopped up Rs 422 crore, the second issue received subscription worth Rs 504 crore.

Meanwhile, the anytime facility provided by the FI during this fiscal, which is an open window for buying and selling ICICI bonds,, has also received encouraging response from investors.

According to Buch, bonds worth Rs 25 lakh have been placed with them while there have been buyers for bonds worth Rs 7 crore through this facility.