State-of-the-art share depository built in Bombay

State-of-the-art share depository built in Bombay

By Madhu Nainan

BOMBAY (AFP): Construction of India's largest and most advanced depository for shares is underway in New Bombay, a satellite city across the harbor from the country's financial capital, paving the way for computerized trading on Indian bourses.

The Central Securities Depository, being built by the Stock Holding Corp. of India (SHCIL) at a cost of US$33 million, will be ready by mid-1995 and able to house all the securities certificates in India.

SHCIL Managing Director R. Chandrashekharan said the 15 meter (49.5 feet) building with 100,000 square feet (9,000 square meters) of mostly underground storage space was modeled on a depository in Switzerland.

"Our depository would be as large as the one in Zurich," he said. "It will be robot-operated and human beings will not have access to the vault."

He said project, spread over five acres (two hectares) in New Bombay's business district, was the need of the hour and "part of India's biggest share custodian's strategy to immobilize shares and securities as a prelude to paperless trading."

Explaining the working of the "fire, water and pilfer-proof vault", Chandrashekharan said a courier would hand over the securities in a pouch to a computer operator at the main counter.

The operator will feed in data and the computer will instruct the robot to "read" the codes on the pouch and place it at a particular spot in the vault, he said.

Chandrashekharan said the project, which would usher in paperless trading, would solve problems faced by investors and custodians in India's rapidly booming capital markets, spurred by the economic reforms of 1991.

He said computerized trading would cut transaction costs to just 10 percent and ensure smooth dealings as demanded by foreign investors, who have entered India in greater numbers following the recent opening of the capital market.

"That would mean a phenomenal increase in turnover and also quick and transparent transactions," he said. "The benefits will go to investors, issuing firms, brokers and the entire capital market."

The depository would also upgrade the domestic stock exchanges to global standards. A new National Stock Exchange, the country's first fully computerized multi-location bourse, is due to start operations this month.

Trading is now largely manual on India's 22 stock exchanges, sparking complaints of delays, inefficiency and mistakes. Share transactions, in particular, are cumbersome and time- consuming.

The Bombay Stock Exchange, the oldest and largest bourse, is putting in place a multi-million dollar computerized system to streamline operations and cope with increased cash inflows.

Indian capital markets raised 150 million dollars in fiscal 1985-86 but the figure increased to six billion dollars in 1992- 93. Estimates for last year run to between eight and nine billion dollars.

The SHCIL was formed in 1988 by seven major state-owned financial institutions. It now has custody of more than 15 million securities across the country.