The bank's move coupled with the decision of the Deutsche Bank to go in for stock lending in the dematerialised form is an indication that dematerialisation has reached levels where stock lending can be carried out through this mode. Stock lending has been held up in the country owing to a lack of enough dematerialised shares in the market. Hongkong Bank's custodian services manager Chas Alexander said the custodial arm, which is also a depository participant with the National Securities Depository (NSDL), has identified stock lending as one of the key areas of future growth in the business. According to Alexander, even though dematerialisation has brought down the revenue out of custody of physical paper, other benefitsfar offset this fall.

He said that clients of the bank's custodial wing, who account for 60 per cent of the active FIIs in the country, have dematerialised 90 per cent of their holdings with respect to the first list of 8 securities shortlisted by Sebi for compulsory demat trading.