ICICI had been one of the lobbyists for the waiver of stamp duty on transfer of debt and had even gone to the extent of seeking an opinion from the solicitor general of the country on the issue. The opinion received was positive and since then the finance ministry has been working on the issue. Finance minister Yashwant Sinha announced the waiver in his budget for 1999-2000.

"We have been giving the demat option to investors in our past few prosepectuses but owing to the absence of the stamp duty waiver there has been almost no response. With stamp duty waived-off on transfer of demat bonds it makes little sensein offering bonds to investors in physical form," said ICICI deputy general manager Madhabi Puri Buch.

"We will discuss the issue with the Securities and Exchange Board of India (Sebi) and NSDL and then take a decision on the same. If there is no hitch then we should from the next fiscal be able to offer our bonds only in the demat form. The remat option would of course be available with the investors," she said.

Buch outlined the benefits of the facility for retail and wholesale investors. For the retail investors who are not regular traders and would seek an exit option only in case of emergency, the merits of holding their bonds in demat form is in eliminating cumbersome procedures and risks associated with debt papers.

For the wholesale investors who are always looking at an easy exit route, the stamp duty waiver is a bonanza. The first immediate impact would be that the bid offer spread of one per cent charged for market making owing to stamp duty fee would now come down to zero. This would makeinvestment even more attractive for the wholesale investors.

With an increase in liquidity, the number of players entering the fray would also increase and the amount of investments flowing into the debt markets too would increase significantly."On the one hand we would be writing to all our investors to dematerialise their existing holdings owing to the benefits associated with this. A beginning on this front has already been made and we are offering free dematerialisation of our equity shares and the bonds as well. With the latest development a renewed thrust would be placed on this exercise. At the same time, we would like to ensure that no fresh paper is created and hence would urge investors to pick up only demat bonds," said Buch.

Sebi has already announced that all future equity issues would only be in the demat form. If an investor does not wish to receive demat shares then the share would be rematerialised for the investor at no cost whatsoever.It is felt that the regulator would have no problemin extending the same facility to debt issues of institutions as well.

"As far as we are concerned we would extend the same facility of not charging any remat charge to investors in bond issues of institutions like ICICI. We would encourage fresh issuance only in demat form," said Bhave. u