• PAGE ONE
• INDEX
• HOME

Castles in the air

R. S. Raghavan, e-mail

This refers to the recent decision of the Reserve Bank of India to permit banks to finance the margin trading system. It is purely a speculative mode of increasing business volumes in capital market activities, thus exposing investors and lending banks t o unwarranted risks.

With so many scams revolving around capital market activities, the margin trading system that enables trading on the margin value rather than the full value would add fuel to the fire. The irregularities resulting from such a situation might only encoura ge speculative business that necessitates higher financial obligations/commitments in an uncertain future.

Authorities should think of boosting the capital market through other constructive and non-speculative means rather than helping stock market players to build castles in the air, knowing fully well that it may collapse sooner or later, notwithstanding th e fact that it is being permitted on a selective basis.