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Rush for bank guarantee cancellation at CSE

A sudden rush for cancellation of bank guarantees (BGs) by brokers was seen on the eve of pay-in number 151 on the Calcutta Stock Exchange (CSE), Thursday, citing dwindling business volumes coupled with letters from private banks seeking 100 per cent coverage against BGs.

A 'significant' number of CSE member brokers thronged Lyons Range with applications seeking cancellation of BGs lying with the bourse, a CSE source said.

"The market situation is such that we have virtually no business and under these circumstances there is no point in paying unnecessary interest to banks for the guarantees which is of no use to us. So we are asking for cancellation of BGs lying with the exchange," brokers said.

Some brokers, however, said, "considering the situation, we think it would be safe to cancel the BGs because nobody knows when it would be invoked by the exchange."

Others said, at present they did not have any business due to ban on short selling. "If we are not doing business there is no reason to continue paying interest to banks, which they charge for providing such guarantees."

"There is panic among the brokers following CSE's decision in the past two weeks to invoke some of the BGs to tide over the payment shortfall necessitated by default of some of the big brokers and their inability to pay-in their required dues. Now we fear that the exchange might invoke our BGs as well if a crisis erupted again," senior brokers said.

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