The Hindu Business Line : Brokers now insist on demand drafts

Mumbai, Jan 23 Squeezed for funds, many brokerages are now insisting that their clients pay up by demand draft or do a bank funds transfer before accepting buy orders for shares.

Mr Mahesh R., a Mumbai-based television scriptwriter, said his broker gave him both these options but was not willing to accept a cheque although he was a known client of many years. He managed transfer of money to his broker’s account by Wednesday morning. But he still could not catch the market on Tuesday at its trough.

“It is not so much from fear of default as for ensuring payment on time, given that we have to place higher margin money with the exchanges,” said the head of the brokerage, a listed equities trader with a pan-India network.

“In fact where there is an option, we are insisting on a funds transfer bank-to-bank, preferably from the same bank as our own bank. Cheques can take time and even DDs are both expensive and can take time, given that we have a large geographical network of branches,” he said.

Stock exchanges have increased margins on 40 stocks to 50 per cent for F&O; while there are value at risk margins on the cash side. Brokerages do not have the liquidity to maintain these margins, said a senior official with another brokerage.

Tuesday morning’s circuit-breaking fall of the market was “a man-made logistical disaster,” said the chief executive of one broking house. “Saturday being a bank holiday and payments could not be collected for Friday’s positions,” he said.

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