The formula being adopted is to split the depository participant business into two distinct divisions, custodial and retail. While the custodial division will continue to target the foreign institutions, the retail division which will have an entirely different team, will concentrate solely on retail investors.

Stanchart has already split the division and Citibank has decided to follow suit by kicking-off retail depository business from Chennai, which is where the bank's retail banking business is centred out of. The HSBC group already has two depository participant licenses, one with the custodial division of HongkongBank and the other with its securities outfit, HSBC Securities. A synergy between the securities outfit and the bank'spersonal banking division is already being harnessed to attract more depository business.

HSBC has in fact announced several sops to lure retail investors."We have seen the potential of this industry worldwide. We have 4,000 accounts already opened with us. Over 300 of these are from brokers. We expect the total number of accounts to swell to 8,000-10,000 by March. The potential is tremendous", said a source at Stanchart.

Interestingly, an almost negligible amount of these accounts have been opened by their existing clients. "It is a totally different business avenue. The target audience is different and we are approaching people with interest in the markets to open accounts with us", said the source. "As a bank we can offer several products like loan against shares which other DPs cannot", he added.

"This is going to be a major growth area for us and we hope to cash in on the big market potential that this industry holds out. Our retail depository operations would be headquartered out of Chennai",said a source at Citibank.With public sector banks being slow to take-off with the depository business, foreign banks are looking forward to grabbing a large slice of the market.

International markets being only in scripless form, these banks have considerable first-hand knowledge of the mechanisms and are not staying away from investing heavily in training and back offfice system support.It is felt that there is tremendous opportunity for banks as typically investors would feel more comfortable in keeping their money with a bank rather than an NBFC or a broker.

Apart from private sector banks, the bulk of the 91,000-odd accounts that have been opened with the depository so far are with broker depository participants.

"With state-run banks taking their own time, foreign banks have moved in and going by the bullish fervour attached to their operations they could become strong players in the depository business", said a depository source.