Financial Daily from THE HINDU group of publications
Tuesday, Mar 18, 2003
Industry & Economy
Money & Banking - Financial Institutions
Fast money? Just buy FI bonds
KOLKATA, March 17
BRING an FI bond, take home cash. This seems to be the punchline for what has lately emerged as a new business for some of Kolkata's financial intermediaries, including a few small players on the local stock exchange.
An unorganised market is currently thriving in the city, thanks to a clutch of independent operators who are offering an easy way out for investors who need quick money.
The FI issues that are more in demand are bonds from ICICI and IDBI. Added to these are paper issued by select State Government concerns, especially those in Gujarat, Maharashtra and Karnataka.
The target is obviously retail investors who are being lured with the promise that money will be delivered to them across the counter, sometimes within minutes of completion of formalities. And, depending on circumstances, incentives are also being offered.
"We try to hand out the money within half an hour," says Mr J. Chaturvedi, one of the more outspoken `arrangers', adding that an investor is proffered different rates for different securities. ICICI and IDBI have been consistently raising funds through various kinds of bond issues under brand names such as Flexibonds and Omnibonds and these are among the most reliable instruments for his business.
According to investment circles, the procedure creates an informal market for these bonds because it enables people in need to liquidate (albeit before the expiry of the full tenure) part of their fixed-income portfolio for cash.
The intermediaries, some of whom are not unfamiliar on the stock exchange circuit, point out that not all sorts of securities are accepted. Some State Government papers are preferred over others because of reasons such as Government guarantees, while investments such as units of mutual funds are not accepted because of their very nature.
The market has its own special considerations too. Sources indicate that intermediaries are sometimes ready to shell out added cash incentives for, say, the first 50 or 100 investors who might show interest in the idea.
"Kolkata has always been a great place for incentives... and the latest fad partly reflects this tendency," notes Mr Krishnendu Basu, a freelance financial advisor, recalling that investors in the city had in the past lapped up incentives that were offered for fixed deposits and mutual funds. The same could hold true in this case as well.
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