Nedungadi Bank, Bse Tie Up For Brokers Bank

The Bombay Stock Exchange is expected to soon announce a formal tie-up with the Calicut-based Nedungadi Bank. According to BSE sources, the new arrangement would involve advances against shares, credit lines to brokers for working capital requirements, bank guarantees and lower demand draft commissions than those offered by Bank of India, the BSE clearing bank.

The move assumes significance as it indicates a widening of the rift between the BSE and Bank of India. Earlier, the BSE and Bank of India could not reach an agreement on investment in the BSEs proposed depository and the bourse eventually went ahead alone with its depository plan. However, it could not be confirmed if Nedungadi Bank will replace Bank of India as the BSEs clearing bank.

 

The BSE had earlier proposed to set up its own bank to provide facilities which exchange brokers could not get from other commercial banks. However, the proposal was turned down by the Reserve Bank of India. It is also not possible for the BSE to take over any other bank.

BSE sources said the bourse was not happy with the facilities provided by Bank of India. We are not happy with the facilities provided by Bank of India. They are not upgrading their facilities to suit our requirements despite the stock exchange branch being one of its most profitable branches, a senior BSE governing board source said. Bank of India officials were not available for comment.

BSE chairman M G Damani and director Suresh Vaidya were recently inducted as directors on the Nedungadi Bank board. BSE treasurer Rajendra Banthia holds about 7 per cent in the bank. According to Nedungadi Bank chairman A R Moorthy, the banks shares are widely held, with no individual owning more than seven per cent.

The banks scrip has moved up sharply after the acquisition of shares by some brokers in Mumbai late last year. It touched its peak of Rs 66 in December on bourses. While Moorthy attributes the rise in the stock price to the half-year results, market sources said the eventual tie-up with the BSE has resulted in increased trading activity.