Capital Gains Sop Likely For Brokers Turning Corporate

Government sources say the finance ministry is convening a meeting of top brokers in the next ten days on the subject.

Finance minister P Chidambaram is on record that that corporatisation of brokerages is the key to stock market reforms. He also announced his intention to discuss with brokers a scheme to facilitate conversion of broking firms into corporate entities.

Besides the capital gains tax exemption, brokers may also be asked to suggest otheroptions.

The Bombay Stock Exchange has been pressing for fiscal concessions. BSE wants the ministry to view capital gains exemption as a market reform measure and not regard it as a measure that entails revenue loss. A revenue loss, argues BSE, is in any case notional since very little revenue now results from this source.

Says BSE executive director Ramesh Mathur: (Once such an exemption is given) "bigger, stronger broking firms, capable of handling large volumes can then come in. This would also help in containing market risks, since the firms would be more sound."

Mathur says that with stiff competition from foreign broking firms which now dominate FII business, a capital gains exemption could provide a big push to Indian broking firms.

BSE would welcome a waiver even for a limited period, say, one or two years.

The bourses and the ministry have also discussed how to check misuse of such an exemption. Exemptions can be granted only to brokerages which are not dormant, or a lock-in of the original cardholder's stake for a fixed period can be insisted upon.