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April 13th, 2017, 07:56 AM
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Join Date: Mar 2012
Re: Punjab National Bank Gilt

In 1996 Reserve Bank of India introduced the system of Primary Dealers with a view to strengthen the institutional infrastructure of Government Securities market. Six entities were granted licenses of which PNB Gilts was one.

The Company was established as a wholly owned subsidiary of Punjab National Bank with an initial paid up capital of Rs 50 crs. The net-worth of the Company has increased from Rs 50 crs to Rs 731.22 crs. It is the only listed primary dealer in India and the public share holding in company is 25.93 %.

PNB Gilts Money Investment

PNB Gilts Ltd is in the market for purchase and sale of CPs , CDs and Corporate Bonds.

Transactions in Corporate Bonds have to be settled through the National Securities Clearing Corporation Ltd. (NSCCL) or Indian Clearing Corporation Ltd. (ICCL), as per RBI regulations to eliminate settlement risk.

Eligibility:
Individual, Corporate, Regional Rural Banks, Co-operative Banks, Provident Funds, Pension Funds, Gratuity Funds, Firms, Partnership firms, Trusts, Insurance Companies, Mutual Funds, Banks

Pre-Requisites:
Investor must have Demat Account

Types of Securities:

a) Certificate of Deposit:

CD is a short term security (7 days to 365 days) issued by a commercial bank at a discount to the face value. Invest in CDs starting from a minimum of 5 crores (face value)

Advantages
- Normally higher return as compared to bank FDR.
- rated by approved rating agencies (e.g. CARE, ICRA, CRISIL, FITCH)
- can be traded in the secondary market, depending upon demand.

Disadvantages
No interim redemption can be sought from the Bank

b) Commercial Paper:

CP is a short term security (7 days to 365 days) issued by a corporate entity (other than a bank), at a discount to the face value. Invest in CPs starting from a minimum of 5 crores(face value).

Advantages
- higher return than fixed deposits & CDs
- rated by approved rating agencies (e.g. CARE, ICRA, CRISIL, FITCH).
- PNB Gilts Ltd deals in investment grade scrips only
- traded in the secondary market, depending upon demand

Disadvantages
- may become illiquid
- may be required to be held till maturity
- credit risk is attached
- an unsecured instrument not backed by any assets .

c) Corporate Bonds:

Corporate bonds are issued by public sector undertakings and private corporations for a wide range of tenors ranging from 3-15 years. Invest in Corporate Bonds starting from a minimum of 10 lacs (face value).

Advantages
- offer higher returns than Government Securities, fixed deposits, CD's & CP's
- bonds are rated by approved rating agencies (e.g. CARE, ICRA, CRISIL, FITCH).
- PNB Gilts Ltd deals in investment grade scrips only
- Provide investors with a steady income stream.
- can lock-in high rates for a long period of time( 3-15 years).
- Secondary market trading is possible, depending upon demand.

Disadvantages
- are generally unsecured and therefore have an element of credit risk.
- All Corporate bonds are not actively traded
- While interest rate is generally fixed, all debt securities are subject to market risk.


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