Brokers see major diversion of bank deposits to G-Secs

The broking community in the country rejoiced at the launch of retail trade in government papers on bourses as it could attract about Rs 20,...

The broking community in the country rejoiced at the launch of retail trade in government papers on bourses as it could attract about Rs 20,000 crore funds in debt market from the banking channels.

While ruling out any possibility of a scam in G-Secs, the brokers said government should lower or waive the stamp duty on its securities as it might unnecessarily reduce the returns to small investors.

“It’s a great opportunity for brokers. We expect shift in funds from bank deposits to the G-Secs market. Of the annual Rs 60,000-70,000 crore incremental bank deposits, we expect at least 25 per cent to flow into the G-Secs in the near future,” leading broker and former BSE president Deena Mehta told PTI.

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IDBI chairman P. P. Vora pointed out that return from bank deposits were lower than that from Gilts. The reason for an anticipated shift in funds from banks to debt markets was that average yield on G-Secs were about 5-5.5 per cent in contrast to 4.5-5 per cent on bank deposits.

With government borrowing at over Rs 1,40,000 crore, Mehta said it provided immense opportunity for retail segments to go for gilts as a safe investment option. “Once this market grows to a reasonable level, government can bypass banking sector and mop up resources directly from the market through methods like IPOs and book-building,” he added.