BSE to invest Rs 30 cr in depository

BSE proposes to invite various banks, institutions and other market players to participate in the ownership of the depository as joint promoters. About 75 per cent of the proposed capital has already been reserved by eligible promoters, of which at least Rs 30 crore is proposed to be invested by BSE.

"We believe it is only appropriate that members of BSE also become promoting members of the depository. We are willing to reserve50,000 shares of Rs 10 each per member. For corporate members with a net worth of more than Rs 10 crore, we would be willing to reserve 1 lakh shares of Rs 10 each per member," states the letter.

It adds, "The depository may consider exempting the promoting members from the admission fee payable to the depository as depository participants. The depository will also constitute a committee of broking members to take advice regarding the business rules, operating procedures and tariff structure." BSE is currently in the process of setting up the second depository in the country after the National Securities Depository Ltd (NSDL). was established in November 1996.

NSDL has dematerialised over Rs 20,000-crore worth of securities with 180-odd companies having signed up with it for admitting their securities for dematerialisation.

The letter by Damani says that a second depository is essential to accelerate scripless trading, to make a major thrust in individual investors’ participation and create acompetitive environment which will be responsive to the users’ interests and demands.

It adds that the project details of the depository had been submitted to noted consultants Arthur Andersen, who in turn have prepared a feasibility report on the establishment of the Central Depository Services (India) Ltd.

The BSE depository has outlined a lower tariff structure and direct retail promotion through depository participants as its focus areas. "It is now clear that Sebi will push for the promotion of scripless trading with more mandatory prescriptions and the venture, therefore, is bound to be financially successful. Though profit cannot be the prime motive in the establishment of an infrastructural facility like the depository, we expect the depository to be self-supporting and offer a reasonable rate of return," says Damani.

The letter, however, according to Damani, is not to be viewed as an offer but only a means to ascertain the willingness of the members to join in the venture.