Decade-long Decline in SCBs’ Ownership of Government Securities

Current Context: The share of Scheduled Commercial Banks (SCBs) in the ownership of Central and State government securities has indeed decreased significantly over the last decade up to FY23.

• According to a report by Bank of Baroda’s economic research department, the share of SCBs has declined from 45.1% in FY13 to 35.7% in FY23.
• However, as of September 2023, it stands at 36.6%.
• Interestingly, there has been a significant improvement in the share of insurance companies and ‘others’ (primarily driven by pension funds).
• The share of insurance companies jumped to 26.3% in FY23 from 20.7% in FY13, and that of ‘others’ was up at 14.6% in FY23 from 9.6% in FY13.
• The share of the Reserve Bank of India (RBI) has declined from 13.3% in FY13 to 9.7% in FY23 (9% as of FYTD24), and that of Foreign Portfolio Investors (FPIs) has come down from 1.3% to 0.9% (1.1% in FYTD24).
• The outstanding ownership of government debt for both Centre and States combined stood at ₹146-lakh crore as of March 2023, compared with only ₹42-lakh crore at the end of FY13, implying a growth rate of 13.4% (CAGR basis). As of FYTD24 (till September 2023), the combined outstanding amount has risen to ₹155-lakh crore.
• The report expects the outstanding amount of ownership of general government securities to increase to ₹162-163-lakh crore by the end of March 2024.

Question:

Q.1 As of FY23, which group had the largest increase in share of ownership of Central and State government securities compared to FY13?
a. Insurance companies
b. Reserve Bank of India (RBI)
c. Foreign Portfolio Investors (FPIs)
d. ‘Others’ (primarily driven by pension funds)