PNB Gilts in talks with ASE to offer trading in G-secs

Jyotsna Bhatnagar

Ahmedabad, Oct 8: In view of the resounding success of its government securities (G-Secs) trading over the past nine months, since it was first offered to retail investors, PNB Gilts Ltd is currently in talks with the Ahmedabad Stock Exchange (ASE) for a possible tie-up to facilitate G-Secs trading.

In Ahmedabad to promote awareness about the relatively risk-free nature of G-Sec trading for individual investors as well as to explore avenues for purchase, PNB Gilts managing director Arun Kaul revealed that his company had commenced talks with the ASE for a tie-up whereby G-Secs trading could be undertaken on the bourse.

Currently, G-Sec trading can be undertaken on the National Stock Exchange (NSE), the OTCEI as well as The Stock Exchange, Mumbai (BSE). "For commencing G-Sec trading on the ASE, permission from the Reserve Bank of India would be sought," Mr Kaul said. However, he envisaged no problems on this front "provided the ASE puts in place a transparent, dematerialised and completely auditable exchange mechanism. Once this is done, we can offer our G-Secs trading expertise to the ASE".

Meanwhile, in view of the overwhelming response to trading in G-Secs, which PNB Gilts started retailing in January this year, Mr Kaul said his company had decided to increase the number of branches of its parent company, the Punjab National Bank, from the existing 10 to 26 locations across the country within this month itself and thereafter to 31 within the next couple of months.

While maintaining that PNB Gilts was targeting a trading turnover of Rs 1 lakh crore in the current fiscal of which it had already achieved a turnover exceeding Rs 5 lakh crore within the first six months itself. The MD, however, rued the fact that small investors were still by and large unaware about the fact that G-Secs were a "good, stable and relatively risk-free investment." He maintained that even the RBI was keen that a large retail market should be created for this in view of the large borrowing requirements of the government. "Banks, primary dealers and the stock exchanges too are keen to spread it," Mr Kaul revealed.

Asked why then PNB Gilts had refrained from large scale advertising to create awareness about the product, Mr Kaul said this was largely on account of the fact that this would entail a huge advertising expenditure for the company "which is still a small entity".

More importantly he maintained that large scale advertising exposure should be undertaken only once his company was in a position to offer the product countrywide. "At the moment, the network of branches offering G-Secs is limited. Once we have the infrastructure in place, we will commence large scale advertising as well," he said.
He expressed optimism that the debt market would grow rapidly in India as well. "World over in developed countries, the debt markets are three to four times larger than equity markets. However,
in India debt markets are smaller than equity markets primarily because interest rates were largely administered prior to
liberalisation."

He hastened to add, however, that post liberalisation, the secondary market in debt instruments was becoming active and "the government securities markets in particular have seen an upsurge".