The current custodian, the Stock Holding Corporation of India, a large depository participant owned by public financial institutions, charges close to ₹19 crore for the job.
Other institutions in the race for the custody mandate of the National Pension Scheme (NPS) involve City, SBI-SG Global Securities Services (a joint venture between) State Bank Of India and Societe Generale Securities Services), and ICICI. The fee quoted by these organizations is more than ₹1 crore.
NPS, initiated by the central government and involving multiple asset managers handling one of the largest fund pools in the country, is regulated by the Pension Fund Regulatory and Development Authority.
“It’s a coveted mandate. So, Deutsche probably took a call to make money out of a floating float, which it can enjoy as a custodian,” said a bank official.
A Deutsche India spokesperson said the bank would not comment on the customer’s order.
“Besides fees, there may be other ways to earn. Discount brokers charge little or nothing from stock traders. But, with so much liquidity, the earnings from the float diminished with the drop in rates overnight. It may further reduce with T+1 (settlement in stock exchanges),” said an official of a financial intermediary.
A custodian has the opportunity to enjoy a day’s float by depositing some money with the Reserve Bank of India under the reverse repo facility or in the inter-bank market.
Funds in NPS are transferred from the employer (when the salary is paid) to collection banks, after which the money is transferred to the custodian when an asset manager decides to invest in bonds and equities. Since the investment happens within a day or two, the custodian has limited inflows.
Deutsche Boli has to pass the test prescribed by Finance Ministry.
According to the Government’s ‘Manual for Procurement of Consultancy and Other Services’, “an abnormally low bid is one in which the bid price, in combination with the other elements of the bid, appears so low that it appears to be of material concern as to potential.” triggers the bidder to enter into the contract at the price offered. The procuring entity may seek written explanation from the bidder in such matters regarding its scope, schedule, allocation of risks and responsibilities and any other requirements thereof. Includes a detailed price analysis of the bid price. Bid document. If, after evaluating the price analysis, (a) the purchasing entity determines that the bidder has substantially failed to demonstrate its ability to deliver the contract at the proposed price , the purchasing entity may reject the bid/offer.
Recently, a similar bid by another multinational bank for a custody mandate of postal life insurance was rejected on this ground.
While custody is a stable and demanding business, some institutions have recently changed their behavior in choosing custodians. The Life Insurance Corporation of India (LIC) recently closed the doors for foreign banks to select custodians for their ₹10 lakh crore stock and corporate bonds. MNC banks incur losses LICThe condition was that if the bidder was a foreign company or a multinational company, then any of its securities would have to be listed in India.