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IDBI Bank has modified its online investment portal ‘Samriddhi’ to enable retail investors and high net-worth (HNI) individuals to invest in inflation-indexed bonds (IIBs).
The Government introduced such bonds in June to offer investors an alternative to investing in physical assets, such as gold and real estate.
The bonds seek to provide inflation protection to both principal and interest payments.
Market maker
To ensure liquidity, IDBI Bank will play the role of a market-maker, providing bid-ask quotes for the bonds.
To encourage investment in these instruments, the bank will not charge any brokerage. An investor can buy and sell bonds worth Rs 10,000 (minimum face value) and in multiples of Rs 10,000 thereafter, subject to a maximum of Rs 25 lakh per deal. All that an investor needs to have to transact in IIBs through the portal is a bank account (with any bank), demat account and an Internet connection on a desktop, laptop or mobile phone.
At the launch event, H.R. Khan, Deputy Governor, Reserve Bank of India, said: “From the issuer (the Government’s) point of view, the inflation-indexed bond brings in a diversified investor base. Obviously, we have been liberalising the opening of our debt market to foreign investors. But predominantly it remains a domestic investor-driven market which, in a sense, provides resilience and strength to the market.”
According to Khan, it makes eminent sense to get into government securities (G-Secs) from the investor point of view as well.
World-over, institutional investors play a predominant role in the G-Secs market. But there are situations, countries and products, where individual retail investors and HNIs, apart from mid-segment investors, such as provident funds, trusts and corporates, also have an interest in IIBs.
The Government introduced such bonds in June to offer investors an alternative to investing in physical assets, such as gold and real estate.
The bonds seek to provide inflation protection to both principal and interest payments.
Market maker
To ensure liquidity, IDBI Bank will play the role of a market-maker, providing bid-ask quotes for the bonds.
To encourage investment in these instruments, the bank will not charge any brokerage. An investor can buy and sell bonds worth Rs 10,000 (minimum face value) and in multiples of Rs 10,000 thereafter, subject to a maximum of Rs 25 lakh per deal. All that an investor needs to have to transact in IIBs through the portal is a bank account (with any bank), demat account and an Internet connection on a desktop, laptop or mobile phone.
At the launch event, H.R. Khan, Deputy Governor, Reserve Bank of India, said: “From the issuer (the Government’s) point of view, the inflation-indexed bond brings in a diversified investor base. Obviously, we have been liberalising the opening of our debt market to foreign investors. But predominantly it remains a domestic investor-driven market which, in a sense, provides resilience and strength to the market.”
According to Khan, it makes eminent sense to get into government securities (G-Secs) from the investor point of view as well.
World-over, institutional investors play a predominant role in the G-Secs market. But there are situations, countries and products, where individual retail investors and HNIs, apart from mid-segment investors, such as provident funds, trusts and corporates, also have an interest in IIBs.
Risk-free return
The interest in such bonds stems from risk-free returns (of course, it may not be so in all countries but at least India offers risk-free returns). Over a long duration, this investment provides a decent return, capital is protected and there is reasonable liquidity, said Khan.
M.S. Raghavan, Chairman and Managing Director, IDBI Bank, said the vending of IIBs through the portal will generate retail interest in inflation-indexed bonds.
Besides IIBs, investors can buy/ sell G-Secs and certificates of deposit (only of IDBI Bank) through the portal.
Source: thehindubusinessline
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