8.

2 Advances to share and stock brokers:

Badla’ transactions are not to be financed.

a) Share and stock brokers shall be provided need based overdraft facilities or
line of credit against shares, debentures, PSU bonds and units held by them
as stock-in-trade.

The assessment of need based requirements for such finance shall be made,
taking into account the financial position of the borrower, operations on his own
account and on behalf of clients, income earned, the average turnover period of
stocks and shares and the extent to which broker’s funds are required to be
involved in his business operations. Large scale investment in securities on own
account by stock and share brokers with bank finance, shall not be encouraged.
The securities lodged as collateral shall be easily marketable.

b) The ceiling of credit limit of Rs 10 lacs against paper securities and Rs 20

lacs against dematerialized securities to individuals will not be applicable in
the case of share and stock brokers and the advances shall be need based.

c) Fund based Working Capital credit facilities are to be sanctioned to share and
stock brokers to meet the cash flow gap between delivery and payment for DVP
(Delivery Versus Payment) transactions undertaken on behalf of institutional
clients viz. Financial Institutions (FI), Foreign Institutional Investors (FII), Mutual
Funds and Banks.

d) The duration of working capital credit facility shall not be more than one year
period and should be based on assessment of the financing requirements
keeping in view the cash flow gaps, the broker’s funds required to be deployed
for the transaction and the overall financial position of the broker.

The utilization is to be monitored on the basis of individual transactions.

For this purpose, a declaration for every debit entry and certified auditor’s
statement on a monthly basis shall be obtained.

e) Bank Guarantees can also be issued on behalf of share and stock brokers in
favour of stock exchanges in lieu of security deposit to the extent it is
acceptable in the form of bank guarantee as laid down by stock exchanges.
Bank Guarantees can also be issued in lieu of margin requirements as per
stock exchange regulations.

f) The requirement relating to transfer in Bank’s name in respect of securities

held in physical form is not applicable for advances granted to share and
stock brokers provided such securities are held by the Bank for a period of
not exceeding nine months. In case the period of holding exceeds nine
months, the securities should be transferred in bank’s name, irrespective of
size of the credit limit.

In case of dematerialized shares, the depository system provides facility for

pledging and this facility is to be availed irrespective of the size of credit limits.
In such cases, there is no need to transfer the shares in the name of the Bank
irrespective of the period of holding. In case of default in the account, the option
to get the shares transferred in the Bank’s name is to be exercised.

g) The share and stock brokers may be permitted to substitute the securities
pledged by them as and when necessary.
Advances are to be granted only to share and stock brokers registered with SEBI
and who comply with capital adequacy norms prescribed by SEBI or Stock
Exchanges.
The exposure limits are fixed as follows :

S. Category of advance Revised exposure limit

No
1 Loans & advances to 0.25% of NBC or Rs 37.50 crores whichever is
Individuals etc for the less
purpose of investments

2 Funded & Non Funded i) 0.25% of NBC or Rs.37.50 crores whichever is

facilities to Stock less for aggregate Funded & Non Funded
Brokers exposure
ii) Individual exposure Rs.10.00 crores

3 Funded facility to i) 0.25% of NBC or Rs.37.50 crores whichever

market makers is less
ii) Individual exposure Rs 10.00 crores

4 Loans & advances to i) 0.25% of NBC or Rs.37.50 crores whichever

corporates for meeting is less
promoters contribution
ii) Individual exposure Rs. 10.00 crores
h)