"The first step, which has been mooted towards this direction is to allow IndusInd Bank to provide certain liberal banking facilities to brokers," explained a BSE source, highlighting the decision taken by the governing board to open a margin account at IndusInd bank.

The liberal banking facilities would effectively mean that the bank would issue bank guarantees to the brokers, overdraft against securities and electronic fund transfer. Interestingly, about 80 brokers have already opened their accounts with the bank in order to settle their margin requirements, which is likely to start off in early September.

"Although we have started off with select liberal banking facilities, our intention is to acquire a substantial chunk of the funds related to the pay-in and pay-out activities on the exchange," explained an official of IndusInd Bank. Traditionally, Bank of India (BoI) was the only bank which provided all settlement related activities. However, in view of the complaints received by brokers against the deteriorating services provided by BoI, the exchange has decided to offer brokers the liberty to open settlement accounts with any other bank.

According to market sources, over Rs 25-30 crore of business pours into BoI's kitty from BSE. This portion of the business, according to industry experts, could witness a gradual erosion and flow into the books of other privatised banks which have computerised customer services.

"The decision to outsource some of BSE's depository business was based on the experiences with BoI. However, keeping in mind the interest of business relations with BoI and the staff union, we have decided to continue with our business with BoI," explained RC Mathur, executive director of BSE, in the light of the bids received by the exchange from various privatised banks. It should be recalled that earlier HDFC Bank, Times Bank, Global Trust Bank and IndusInd Bank had approached BSE for a similar kind of tieup in the last quarter of 1997 which was set aside.