The capital market regulator is exploring possible measures so that the clearing and settlement system for stock market trades is not over-exposed to a handful of banks, reported The Economic Times.
Brokers, serving as clearing members for stock transactions, are required to keep collaterals — in the form of fixed deposits, bank guarantees, securities, and cash — with the stock clearing corporations.
Over the years, half a dozen banks, specialising in capital market exposures with their dealing with brokers and investors pledging stocks to raise funds for trades, have captured the market. As a result, these banks have ended up holding a predominant value of the FDs and securities and issuing guarantees given as collaterals with the clearing corporations.
Now, the Sebi is examining whether this should change and to what extent it poses a risk.
“The crisis faced by Yes Bank two years ago was a kind of wake-up call. What if a bank holding a sizable part of the collateral ran into trouble? What if such a bank faces a run and is put under moratorium by RBI (The Reserve Bank of India) to ringfence the banking system? Such a situation can block the collaterals, freeze trade limits, and affect the wider market,” a senior banker said.