By Jayshree P Upadhyay
(Reuters) – India’s markets regulator on Tuesday barred brokers from creating new bank guarantees on clients’ funds starting May 1, and said all existing bank guarantees should wind down by Sept. 30.
Currently brokers and other intermediaries pledge clients’ funds with banks, which in turn issue guarantees to clearing corporations for higher amounts.
The Securities and Exchange Board of India (SEBI) said in a circular that this ‘implicit’ leverage exposes the market, and especially the client’s funds to risks.
Stock exchanges and clearing corporations have been asked to monitor the winding down of bank guarantees in an orderly manner, the SEBI said.
(Reporting by Jayshree P Upadhyay; Editing by Nivedita Bhattacharjee)
