The Hindu Business Line : `Daily, it is about 16,000 requests for demat'

DEMATERIALISATION of equity has been clearly the market's top priority. However, the time has come when investors may consider dematerialising their debt holdings too, feels Mr C.B. Bhave, CMD of National Securities Depository Ltd.

"This may well become important in the days ahead. Trading in debt is set to develop into a bigger ballgame," he said.

Excerpts:

Debt dematerialisation is still in its infancy. Comments.

Initially, when it came to debt, there were a few legal issues to grapple with. Things have improved since then. New debt issues are now in the paperless form. Generally speaking, debt investors are warming up to the concept of dematerialising their holdings and have started to appreciate the logic involved. In the case of debt, the issuer's commitment expires on maturity. This is, therefore, different from equity, which is an enduring affair.

Nevertheless, a major issue stems from the relatively low demat that has happened on the retail side. It is basically an institutional market, marked by the presence of banks, mutual funds and the like. One hopes that retail activity will pick up in course of time.

In fact, the Government has recently taken an initiative in this matter. A special group, led by Dr R.H. Patil, UTI chief, is expected to carry it forward.

But it is still a long way to go.

Let me tell you that corporate debt is not really a problem. We have had some success with government securities as well. Once again, however, primary dealers and banks provide the necessary institutional support to the g-sec market.

In comparison, retail involvement is practically absent. This has to change in the long run.

How does the depository view the current equity scenario?

If you look at the sheer number of trades taking place on NSE and BSE, the top two exchanges in the country, you will find that it has been soaring. In the backdrop of the current equity upsurge, investors are a fairly busy lot - which is obvious from the statistics that are piling up at our end. The number of demat requests is currently very high. Daily, it is about 16,000.

My sense is that people would not be resorting to this unless they want to participate in the market as serious investors. Needless to say, the number of demat accounts that have been opened with depositories has also jumped.

And, no, institutions are not opening these accounts; instead, it is the retail players who are working diligently.

But isn't there a flip side to the boom? What if FIIs pull out suddenly?

I personally do not think all FIIs will sell abruptly on one fine morning. Yes, large outflows can happen. Overall, FII flows have been buoyant. The tally has been generally positive for the past few years, except for some months.

But, truly, it is not a one-way street. They may move out sooner than later. It is difficult to foretell. Anyone who says he knows how the market will behave tomorrow is being adventurous.

For NSDL, are newer businesses emerging?

Yes, that has already happened to some extent, courtesy TIN, the tax information network that is being put in place. TDS reconciliation will be a lot easier from now on.

Besides, we are also into dematerialisation of warehouse receipts. However, here the rate of growth has been low so far. I think our involvement in other things (and not demat of securities alone) will be greater in the days to come.

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