LIC In Dialogue With Banks For FRA Pitch

Mumbai: LIC of India is talking to a few banks as it plans to start investing in Forward Rate Agreement (FRA) bonds. Siddhartha Mohanty, MD & CEO, LIC, had informed about it in the press conference recently. The reason is that the bonds, particularly the ones which are large in size, can be traded with banks only.

State Bank of India (SBI), Bank of Baroda (BoB), Citibank and Standard Chartered Bank are few of the lenders that are active in the space.A senior LIC official revealed on the condition of anonymity that the Corporation’s talk with quite a few lenders- foreign and domestic as well- was in advance stage in this context.

Requesting anonymity, an official at Bank of Baroda said: “We are in touch with official of LIC, the process of ISDA (legal doc for Bond FRA) execution is almost in the final stage with LIC.”

Talking to Bizz Buzz, MV Hariharan, ex-treasury head, SBI said: “Given the assets of LIC, the AUM, etc. This looks logical given the uncertainties regarding the interest rate trajectory going forward. The tenors, the Corporation MD & CEO is interested in, are important to understand what’s his outlook for the rates direction with the rapidity that he’s expecting it to rise.” Furthermore, transactions can happen depending upon the appetite for such trades where the quoting Bank outlook too is aligned with their own internal ALM compulsions, he added.

Ticket size of such trades is the other important factor, along with the pricing.

The over-all volumes that LIC may have in mind will be known only in calibrated dribbles in which the trades initially are struck.Once the first transaction happens, the market will attempt to second guess the LIC POV and the pricing will suitably get tweaked.