reserve bank of india on saturday said banks should maintain a minimum margin of 40 per cent on funds lent while extending finance to stock brokers for margin trading. the banks should put in place appropriate systems for monitoring the margin (40 per cent) and if the stockbroker/client fails to meet the margin calls, the lending bank should liquidate the collateral/shares purchased immediately and adjust the loans, rbi said in its circular to all commercial banks here on saturday. earlier on september 18, the rbi-sebi technical committee decided to permit banks to extend finance to stock brokers for margin trading within the overall ceiling of 5 per cent prescribed for exposure of banks to capital market. the committee has said banks may provide finance to brokers for margin trading in actively trading scrips forming part of the nifty and the sensex. rbi in its revised guidelines for bank financing of equities and investment in shares has asked the bank boards to come out with necessary safeguards to ensure that no "nexus" develops between the inter-connected stock broking entities/stock brokers and bank in respect of margin trading.
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