The consortium of six banks has assured the stock brokers'' community, that it would provide credit line of Rs 30 billion by end of this month to help smooth transition of badla financing to margin financing. Sources close to the capital market said that a meeting was held, under the chairmanship of State Bank Governor Dr Ishrat Hussain on Monday at the State Bank. Representative of Securities and Exchange Commission of Pakistan Shahid Ghaffar, Securities Market Commissioner, heads of commercial banks and some prominent brokers attended the meeting.
Dr Ishrat asked the heads of the banks to immediately streamline the procedures of margin financing and wanted the banks and financial institutions to immediately provide products to stock brokers community.
As per directives of State Bank Governor, six banks, namely, National Bank of Pakistan, Muslim Commercial Bank, Bank Alfalah, Faysal Bank, Picic Commercial Bank and Picic agreed to provide credit line of Rs 30 billion to stockbrokers by May 30, instead of second week of June.
The scheme would start formally from May 30, but Faysal Bank has launched its product for stockbrokers already, and released funds totalling Rs 500 million for 34 brokers on Monday. "The funds have been released in order to improve liquidity in the market, where most of the investors fear that because of introduction of margin financing, switching of traditional badla system, equity market may face liquidity crunch", sources said.
The logistics of margin financing would be discussed at length, as several banks have assured all stakeholders that they have prepared rules pertaining to margin financing.
The experts were of the opinion that though some of the institutions claimed that they have prepared steps, the stockbrokers are still confused about the module as they have reservations regarding the settlement risk and the future course, following the elimination of the badla system.