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Rs 100 bn debt papers shifted to demat at NSDL

Rakesh P Sharma & Ashwin J Punnen

Debt papers worth over Rs 100 billion with the National Securities Depository Ltd have been converted into electronic format, showing that dematerialisation of corporate debt instruments is picking up in a big way.

C B Bhave, managing director, NSDL said, "The dematerialisation is spread across more than 40,000 accounts, which means that the retail investors along with institutional investors are going for demat."

He said that the Reserve Bank of India directive to banks, financial institutions and primary dealers to hold commercial papers only in electronic form was a major fillip to debt dematerialisation.

The central bank has also set a deadline on October 31, 2001 for these entities to dematerialise their outstanding investments in the scrip form. This has forced companies to make fresh debt instruments in demat form as the major investors in the market are banks and financial institutions.

Dematerialisation of debt instruments has picked up in the last one year after the Union government removed the stamp duty on transfer of securities in demat form.

Commenting on the status of the secondary market for debt, he said the central bank's decision to set up a clearing corporation for debt securities will lead to an active secondary market for demat securities.

Bhave said that the problem with the debt market is that it is not very active unlike the equity market, and trading and volumes in the debt segment will pick up over a period of time. Currently, around 200-300 transactions take place daily in debt instruments.

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