Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now

You can switch off notifications anytime using browser settings.
Stock Analysis, IPO, Mutual Funds, Bonds & More

Investors raise concerns on DP curbs with Finance Ministry

The circular was issued in the wake of alleged fraud by Allied Financial, which used client collateral as its own to trade in the derivatives segment.

, ET Bureau|
Aug 12, 2019, 09.32 AM IST
Some market participants raised concerns over the recent restrictions imposed by depositories on off-market transactions in their recent meeting with finance ministry. Last month, both the depository participants (DPs) — Central Depository Services (CDSL) and National Securities Depository (NSDL) — came out with a circular barring various off-market transactions from September 1.

For instance, if an individual wants to transfer some of his shares to a family member to be used as collateral for his start-up idea or business, it will no longer be possible. Similarly, transfer from a minor’s account to his guardian’s account, transfer between clients and NBFCs for loan against securities, transfer of securities of delisted shares or unlisted demat shares, shares or mutual funds rights provided as collateral to the company by directors among others done off-market have been barred.

On Friday, finance minister Nirmala Sitharaman along with ministry officials including economic affairs secretary Atanu Chakraborty, met representatives of mutual funds, investment banks, foreign investors and brokers.

“Restrictions on off-market transactions proposed by depositories would create challenges for many investors wanting to transfer their shares with friends and family for seeking loans against collateral,” said Association of National Exchanges Members of India (ANMI) president Vijay Bhushan who attended the meeting. “We submitted that it is the prerogative of the bona-fide owner of a security to transfer it to anyone for any temporary or permanent purpose”.

The circular was issued in the wake of alleged fraud by Allied Financial, which used client collateral as its own to trade in the derivatives segment.

ANMI has made a representation to the depositories and market regulator Securities and Exchange Board of India, urging modifications and addition of new codes which were removed from existing off market transfer codes. Subsequently, DPs issued a modified circular on July 31, 2019 with modified new codes effectively coming into force from September 1, 2019.

Also Read

Budget-making team of Finance Ministry short of two key officials

Finance Ministry wants RBI to take over stressed assets of NBFCs

Finance Ministry says fundamental of Indian economy robust, reforms to stimulate investments

Finance ministry now notifying authority for any change in FDI policy

Finance Ministry seeks details of land parcel from CPSEs for asset monetisation

Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links

Follow us on

Download et app

Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service