Shriram Finance seeks RBI license to underwrite govt debt

Shriram Finance Ltd., one of the largest shadow lenders in India, is seeking to join a select group of entities which underwrite government debt, according to people familiar with the matter.

The consumer loan provider has sought the Reserve Bank of India’s approval to set up a primary dealership, for which it plans to launch a separate entity, the people said, asking not to be identified as the discussions are private.

Primary dealers include banks and securities firms that are mandated to underwrite auctions of sovereign debt and ensure sufficient trading liquidity in the market. Shriram Finance’s move signals the company’s intent to deepen its presence in India’s fast-growing bond markets as the nation ramps up infrastructure investments to lure multinational firms.

A representative for Shriram Finance declined to comment, while the RBI didn’t respond to an email on the matter.

The outstanding amount of federal government bonds was at 112.5 trillion rupees ($1.3 trillion) as of April 7, the latest central bank data showed. At present, there are seven standalone primary dealers and 14 banks which have PD departments. The RBI is very selective about giving PD licenses as these entities play a crucial role in the smooth passage of the government’s borrowing program.

As foreign investors stepped up their purchases with the country’s inclusion in a flagship JPMorgan Chase & Co. index in 2024, trading volumes in the bond market have increased. Long-term investors such as insurance and pension funds also boosted their participation in the segment.

Shriram Finance offers loan services for products ranging from automobiles to gold. A primary dealership license may help the firm deepen its integration with India’s broader financial system.