Street signs: Dabba trading worry for brokers, MFs seek common KYC and more

'Dabba' trading worry for brokers 

Brokerages fear that the rise in compliance costs can force smaller brokers to shut shop and end up pushing clients to the illegal “dabba” trading where there is a lot of flexibility as regulations are blatantly violated. “The stringent margin requirements may make it difficult for smaller brokers to keep hold of their clients who seek to trade in a more relaxed framework where upfront margin is not strictly insisted upon,” said an executive of a broking house. In dabba trading, brokers cut deals on paper chits, instead of the exchange platform to save costs and steer clear of all regulations. Sundar Sethuraman 

MFs seek common KYC in Budget

The mutual fund industry is hoping that the government introduces provisions for a common KYC (know your customer) framework in the Union Budget. “This will allow the industry to use the existing KYC details already provided to banks, which will make it easier to on-board new clients,” said the chief executive of a fund house. The industry has set itself a target of Rs100 trillion of assets in 10 years and industry experts believe a common KYC can be the much-needed catalyst to increase the industry size fourfold from the current Rs26 trillion. Jash Kriplani

LTCG, DDT relief in Budget?

With the Budget around the corner, industry players are hoping that the government will do away with the long-term capital gains (LTCG) tax of 10 per cent for sale of shares after a year, or at least roll it back partially. This, market participants say, will give a fillip to institutional flows, especially from foreign portfolio investors. There is also expectation that the dividend distribution tax (DDT) at 20.35 per cent will be rationalised. DDT is a tax on dividends from profits on which tax has been paid once by the company. In 2017 an additional income tax of 10 per cent was levied on taxpayers for dividend income exceeding Rs10 lakh per annum. Ashley Coutinho