Mumbai, May 28: The Securities & Exchange Board of India (SEBI) has told the Stock Holding Corporation of India (SHCIL) to carry out its stock-lending activity in dematerialised shares. SEBI is also trying to work out a system whereby smaller stock exchanges can join the depository through SHCIL in its capacity as a large depository participant. SHCIL has tied up with the Unit Trust of India (UTI) to commence stock lending, but was all along keen to offer the facility with respect to physical shares as well.This had created a sense of apprehension over which of the two parties would take the risk as SHCIL said it would only be a directed lender. UTI, on the other hand, made it clear that it would not take the risk, and this would have to be borne by SHCIL. In a dematerialised form, the risk associated with bad paper does not arise. Hence the feeling that it would only be logical for stock-lending intermediaries to perform the market-critical function in a dematerialised form. Speaking at the SecuritiesSummit, 1998, organised by Invest India, SEBI executive director Pratip Kar said that dematerialisation could boost the growth of stock lending, and towards this, the market regulator was discussing with UTI and SHCIL to commence the exercise through the depository.
He added that discussions were on to see how SHCIL could step in and help a smaller stock exchange become a member of the depository through the corporation, in the event of the bourse not being able to directly become a depository participant with SHCIL. UTI chief general manager BG Daga said stock lending could take off only in a dematerialised mode, and added that talks were on with some clearing houses to see if the system could take place through the clearing-house mechanism.
Kar said SEBI needed to concentrate on the stock-lending area, where the choice for investments should be driven by economic benefits.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
