LIC: LIC secretly made a deal abroad, will this cause a stir in India's bond market?

India's largest government insurance company, LIC, has made a deal with foreign banks. The insurance company has worked with two big Wall Street firms, JPMorgan Chase & Co. and Bank of America Corp. To keep its liabilities safe, the company has made a bond forward rate deal of about $ 1 billion with these global banks. Let us understand what effect this can have on India's bond market. According to a Bloomberg report, the Indian insurance company has entered into an FRAs agreement with US banks, which is very special in terms of the bond market. In November last year, LIC announced a scheme to enter the bond derivatives market. Due to this, it also made many new deals this year. The company is further strengthening its presence in the bond market. LIC has achieved a 38% share in the bond derivatives market with forward rate agreement (FRA) deals worth $1 billion from May 2025, which is part of the total $2.6 billion volume, as per data available on the Clearing Corporation of India website.

What are FRAs?

In FRA, an insurance company deals with another bank or firm to buy bonds in the future. The bank with which the deal is done takes the responsibility of the risk of the bond, and in return, charges some fixed premium from the deal company. In this, longer-term bonds are usually bought to manage the risk. The effect of the bond agreement on LIC can be seen in the Indian market. Because it is the country's largest insurance company. According to reports, LIC's entry into this market has increased the demand for long-term bonds in the market.

The trend of FRAs is increasing.

The trend of FRAs i.e., bond forward rate deal is gradually increasing. This increase shows the growing strength of India's financial institutions. As Indian families are investing more in the stock market and other financial options, insurance companies like LIC are demanding diverse investment and risk management options. LIC manages assets worth about $630 billion. Forward rate agreements (FRAs) are becoming particularly popular as they allow insurers to secure future interest rates and protect against losses caused by falling interest rates.

Disclaimer: This content has been sourced and edited from TV9. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.