CALCUTTA, AUGUST 30: The Calcutta Stock Exchange (CSE) has been quietly witnessing a spurt in the quantum of vyaj badla financing in the recent months. In the last two months, the average vyaj badla financing had been of the order of Rs 280 crore, a senior broker of the exchange said.However, when compared to the stock exchange, Mumbai, this was one-ninth of what the other premier bourse was doing, the broker said. In Mumbai, the average quantum of vyaj badla financing had been to the extent of Rs 2000 crore.With the introduction of modified carry-forward system (MCFS), the member brokers who were otherwise trading on self-account of sitting idle, were now getting clients willing to invest in vyaj badla financing, said Vivek Mahajan, vice-president of CSE.Vyaj badla is the interest rate on the amount of finance extended to brokers taking outstanding positions. Since brokers doing pure vyaj badla financing were not subject to any imposition of margins, most of the CSE brokers had found this to be means of survival. According to him, vyaj badla was emanating as a very lucrative investment avenue with average annualised returns ranging from 22 per cent to 24 per cent.In terms of yield and liquidity, vyaj badla as an investment could be only compared to money market mutual funds, another member broker said. With the introduction of MCFS, the official vyaj badla rates for different Group A scrips could be ascertained from the trading screen and this had made the entire process transparent, one broker said.Regarding payment of money, the investors would be able to recover their advances at the end of every settlement which was being seven days. According to Mahajan, the investment could be considered very safe as the money was charged against Group A shares lying in the hands of the stock exchange clearing house. The payment was also guaranteed under the settlement guarantee fund, he added.However, most of the brokers had a word of caution for anintending vyaj badla financier. According to them, the investor should carefully select brokers who were not indulging in high degree of speculation. In this context, the investor might run the risk of broker using the entire amount of client's fund to meet the clearing house dues.Official cse vyaj badla rates in the last four consecutiveweeks were 33 per cent, 28 per cent, 22 per cent, and 25 per cent. The determination of the rates depended upon the availability of floating stocks and indicative of outstanding position of group a scrips.Vyaj badla was also found to be a superior investmentavenue as compared to gold, company fixed deposits, and bank fixed deposits, a broker said.
