In India, which of the following can trade in Corporate Bonds and Government Securities?Insurance Co

Q: What is UPSC Prelims?

UPSC Prelims is a competitive examination conducted in India. This question is from the 2024 UPSC Prelims Economy paper.

Q: How can I prepare for UPSC Prelims Economy?

To prepare for UPSC Prelims Economy, practice previous year questions (PYQs), understand concepts thoroughly, and solve mock tests regularly. This 2024 question covers Capital Markets – Stock Exchange, SEBI, Mutual Funds & Bonds topic.

Q: What is the difficulty level of this question?

This UPSC Prelims 2024 Economy question has a medium difficulty level.

Q: Where can I find more UPSC Prelims previous year questions?

You can find more UPSC Prelims previous year questions on AspirantMitraa. Browse by subject, topic, year, and difficulty level to practice effectively.

Question

In India, which of the following can trade in Corporate Bonds and Government Securities?Insurance CompaniesPension FundsRetail InvestorsSelect the correct answer using the code given below:

Accepted Answer

Correct Answer: D  1, 2 and 3Step-by-step Solution:Government Securities (G-Secs) are tradeable debt instruments issued by the Central Government or State Governments. Corporate bonds are debt instruments issued by companies. Both can be traded on various platforms in India.Item 1  Insurance Companies: Insurance companies can and do trade in both Government Securities and Corporate Bonds. In fact, IRDAI (Insurance Regulatory and Development Authority of India) regulations mandate that insurance companies invest a significant portion of their premium collections in G-Secs and other approved debt instruments. They are among the largest institutional investors in India's debt markets. ✓Item 2  Pension Funds: Pension funds  including the National Pension System (NPS) and EPFO (Employees' Provident Fund Organisation)  invest heavily in Government Securities and Corporate Bonds. EPFO, for example, invests a large portion of its corpus in G-Secs as mandated by government investment guidelines. The NPS (managed by Pension Fund Regulatory and Development Authority  PFRDA) allocates assets across equity, G-Secs, and corporate bonds based on subscriber preferences. ✓Item 3  Retail Investors: Retail investors can now trade in Government Securities through the RBI Retail Direct Scheme (launched November 2021). Under this scheme, individual investors can open a Retail Direct Gilt (RDG) account with the RBI and directly buy/sell G-Secs in both primary (auctions) and secondary markets (on the NDS-OM platform). Corporate bonds can be traded by retail investors on stock exchange platforms (BSE, NSE). ✓Why other options are incorrect:Options A, B, C: All undercount  all three categories (Insurance Companies, Pension Funds, Retail Investors) can trade in corporate bonds and G-Secs.Key Concept: India's government securities market participants: Primary Market (G-Sec auctions): Banks, Primary Dealers, Insurance companies, Mutual Funds, Pension Funds, FPIs. Secondary Market: All primary market players + State governments, Co-operative banks, RRBs, MFs, FPIs, retail investors (via RBI Retail Direct). Key platforms: NDS-OM (Negotiated Dealing System-Order Matching): RBI-operated electronic platform for secondary market G-Sec trading; RBI Retail Direct: Allows individuals to invest directly in G-Secs; Gilt Mutual Funds: Invests only in G-Secs; accessible to retail investors via MF route; SEBI's corporate bond platform: Separate debt segment on BSE/NSE. Corporate bond market developments: SEBI mandates 'Large Corporates' (net worth >₹100 crore) to raise 25% of incremental borrowings through bonds; Electronic Book Provider (EBP) platform for primary issuance of bonds; Credit Default Swaps (CDS) on corporate bonds  allowed since 2011. India's G-Sec market size: Outstanding central government debt securities: ~₹100 lakh crore (as of 2024); India included in JP Morgan EM Bond Index (June 2024) and Bloomberg EM Local Currency Index  expected to attract $20–25 billion in FPI inflows.

In India, which of the following can trade in Corporate Bonds and Government Securities?Insurance CompaniesPension FundsRetail InvestorsSelect the correct answer using the code given below:

Master UPSC Prelims with Our Test Series

More Questions from Capital Markets – Stock Exchange, SEBI, Mutual Funds & Bonds

Frequently Asked Questions

In India, which of the following can trade in Corporate Bonds and Government Securities?Insurance CompaniesPension FundsRetail InvestorsSelect the correct answer using the code given below:

Master UPSC Prelims with Our Test Series

More Questions from Capital Markets – Stock Exchange, SEBI, Mutual Funds & Bonds

Frequently Asked Questions